Document:

tlry-ex1018_1287.htm

Exhibit 10.18

[***] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

Privileged & Confidential

 

Profit Participation Agreement

 

This Profit Participation Agreement (this “Agreement”) is effective as of January 14, 2019 (the “Effective Date”) and is entered into by and between ABG Intermediate Holdings 2, LLC, a limited liability company organized in the state of Delaware (“ABG”) and Tilray, Inc., a corporation organized in the state of Delaware (“Company”). Each of Company and ABG shall be referred to herein individually as a “Party” and collectively as the “Parties” unless specifically identified.

 

WHEREAS, ABG or its Affiliates (as hereinafter defined) owns and/or controls all right, title and interest in and to various intellectual property rights in and to the Then-Current ABG 2018 Brands (as hereinafter defined), together with the goodwill of the business symbolized by such intellectual property rights (the “Existing Trademarks”);

 

WHEREAS, Company is primarily engaged in the cultivation of cannabis and the design, manufacture, distribution and sale of Cannabis Products (as hereinafter defined) for medical and recreational, adult use; and

 

WHEREAS, ABG and Company desire to work together with respect to the exploitation of the ABG 2018 Brands (as hereinafter defined) in connection with Cannabis Products (as hereinafter defined) globally in jurisdictions where the applicable use of Cannabis Products does not violate applicable law and, to that end, the Parties desire to enter into this Agreement, pursuant to which Company will purchase from ABG the contractual right to receive the Participation Rights (as hereinafter defined).

 

NOW, THEREFORE, in consideration of the foregoing recitals (which are specifically incorporated herein by this reference), and the mutual agreements contained herein and for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

 

ARTICLE 1.

DEFINITIONS

 

1.1“ABG 2018 Brands” shall be defined as those brands owned or controlled by ABG or its Affiliates as of December 31, 2018, as set forth on Exhibit A, attached hereto and incorporated herein by this reference.

 

1.2“Affiliates” of any person or entity means persons or entities controlled by such person or entity.

 

1.3“Calendar Quarter” means each three (3) month period ending on each of March 31, June 30, September 30 and December 31 of each year.

 

1.4“Calendar Year” means each calendar year (i.e., January 1 through December 31) of the Term.

 

1.5“Cannabis Ingredients” shall be defined as any naturally occurring cannabinoid, compound, derivative or preparation of the Cannabis Plant (“Natural Cannabinoid”) or any synthetic (i.e., human-made) version of such Natural Cannabinoid(s).

 

1.6“Cannabis License” shall be defined as a license agreement (or an extension or renewal thereof) for the design, manufacture, distribution and sale of Cannabis Products (as hereinafter defined) bearing the intellectual property rights of a Then-Current Brand which agreements, extensions or renewals are fully executed by ABG or its Affiliates during the Term (as hereinafter defined).

 

[***] = Certain Confidential Information Omitted

 

1.7“Cannabis Plant” shall be defined as the following species of the cannabis genus: cannabis sativa, cannabis indica and cannabis ruderalis.

 

1.8“Cannabis Products” shall be defined as any products that include or are made or derived from any part of the Cannabis Plant or any synthetic (i.e., human-made) cannabinoids, including, without limitation, extracts, topicals and edibles and any products infused with any cannabinoid, compound, derivative or preparation of the Cannabis Plant such as concentrates, oils or resin. Notwithstanding the foregoing, Cannabis Products shall specifically exclude any of the following products made with or from cannabis: textiles, paper, building materials and technical products (e.g., fuel, coatings, varnishes, etc.).

 

1.9“Change of Control” means a transaction in which (a) a person or entity, in one or a series of related transactions, directly or indirectly, acquires all or at least eighty percent (80%) of a Party’s assets; (b) a Party, directly or indirectly, in one or more related transactions (i) consolidates or merges with or into (whether or not such Party is the surviving entity) one or more other entities; (ii) consummates an ownership interest purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another person or entity; or (iii) reorganizes, recapitalizes or reclassifies its ownership interest such that its voting ownership interests are owned or acquired by any other person or entity and, in each case of this clause (b), whereby such other person or entity acquires ownership interests equal to more than fifty percent (50%) of the then outstanding ownership interests of such person (including, on an as-converted basis, the issuance or sale of convertible securities which may be converted into membership interests of such Party); or (c) any one or a group of persons or entities, in one or a series of related transactions, directly or indirectly, acquires more than fifty percent (50%) of the then outstanding voting ownership interests of such Party (including, on an as if converted basis, convertible securities which may be converted into voting ownership interests of such Party) (such acquiring person or entity pursuant to clauses (a), (b) or (c), the “Acquiring Person”). Notwithstanding anything contained in the definition of “Change of Control” to the contrary, a “Change of Control” shall not occur if any transaction or event contemplated thereby is with any person or entity controlled by, controlling or under common control with such Party. For additional clarity, (x) a transfer or other disposition, whether by spin off, spin out or another similar transaction, of Privateer Holding Inc.’s ownership interest in Company to the then-current owners of Privateer Holding Inc. on a pro rata basis shall not, in and of itself, constitute a Change of Control of Company for purposes of this Agreement, and (y) “sale, lease, exchange, license or other transfer” shall not include any commercial transaction in the ordinary course of business, or any sale and leaseback transaction, the principal purpose of which is to provide financing to Company or one or more direct or indirect Subsidiaries.

 

1.10“Company 2018 Brands” shall be defined as those brands owned or controlled by Company or its Affiliates as of December 31, 2018.

 

1.11“Company Participating Brands” shall be defined as the Then-Current ABG 2018 Brands and those Then-Current Future Brands (as hereinafter defined).

 

1.12“Company Participating Trademarks” shall be defined as all right, title and interest in and to the various intellectual property rights in and to the Company Participating Brands, together with the goodwill of the business symbolized by such intellectual property rights.

 

1.13“Company Trademarks” shall be defined as all right, title and interest in and to the various intellectual property rights in and to the Company 2018 Brands, together with the goodwill of the business symbolized by such intellectual property rights. 

 

1.14“Contract Year” means each twelve (12) month period during the Term. Notwithstanding the foregoing, the period from the Effective Date through December 31, 2019 shall be deemed a Contract Year and subsequently, each Calendar Year thereafter shall be successive Contract Years.

 

1.15“Future ABG Brands” means, as of any date of determination, the brands which ABG or its Affiliates owns or controls a majority interest in as of such date excluding the ABG 2018 Brands.

 

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[***] = Certain Confidential Information Omitted

 

1.16“Future ABG Brand Trademarks” shall be defined as all right, title and interest in and to the various intellectual property rights in and to the Future ABG Brands, together with the goodwill of the business symbolized by such intellectual property rights. 

 

1.17“Gross Cannabis Revenue” shall be defined as: any and all revenue (including, but not limited to, royalties) determined in accordance with GAAP as consistently applied by ABG actually received by ABG or its Affiliates from any Cannabis Licenses during the applicable accounting period of a given Calendar Year less any marketing and advertising payments received by ABG or its Affiliates which ABG or its Affiliates are contractually obligated by unaffiliated third parties to spend.

 

1.18“Licensed Cannabis Products” shall be defined as Cannabis Products bearing the intellectual property rights of any Company Participating Brands.

 

1.19“Net Cannabis Revenue” shall be defined as Gross Cannabis Revenue less: [***].

 

1.20“Term” shall be defined as the period commencing on the Effective Date and continuing in perpetuity.

 

1.21“Then-Current ABG 2018 Brands” shall be defined as, as of any date of determination, the ABG 2018 Brands which ABG or its Affiliates owns or controls a majority interest in as of such date. 

 

1.22“Then-Current Brands” shall be defined as, as of any date of determination, the brands which ABG or its Affiliates owns or controls a majority interest in as of such date. 

 

1.23“Then-Current Future Brands” means Future ABG Brands in which Company purchases Future ABG Brand Participation Rights in accordance with Article 8 below.

 

ARTICLE 2.

PURCHASE OF PROFIT PARTICIPATION RIGHTS

 

2.1Subject to the terms and conditions of this Agreement, ABG hereby sells, and Company hereby purchases, the right to receive up to forty-nine percent (49%) (with the applicable percentage determined in accordance with Section 2.2) of the Net Cannabis Revenue of the Then-Current ABG 2018 Brands (the “ABG 2018 Brands Participation Rights”) in exchange for the consideration to ABG set forth in the Payment Agreement between the Parties of even date herewith (“Consideration”), a copy of which is set forth on Exhibit B, attached hereto and incorporated herein (“Payment Agreement”).

 

2.2Until all Consideration payable under the Payment Agreement (including conditional future Consideration) has been paid in full, Company’s Participation Rights (as hereinafter defined) at the last business day of any Calendar Quarter during the Term of this Agreement shall be equal to the full Participation Rights multiplied by a fraction, the numerator of which is the value of the Consideration actually received by ABG (with Consideration in the form of Class 2 common stock measured at the value assigned to such Class 2 common stock in the Payment Agreement) and the denominator of which is Two Hundred Fifty Million United States Dollars ($250,000,000 USD) (such fraction, the “Pro Rata Adjustment”). Solely for illustrative purposes, if, as of the last day of a Calendar Quarter, ABG has received Consideration under the Payment Agreement of Thirty-Three Million Three Hundred Thirty-Three Thousand Three Hundred Thirty-Three United States Dollars ($33,333,333 USD) in immediately available funds and common stock transferred to ABG with a value (calculated based on the applicable VWAP (as defined in the Payment Agreement)) equal to One Hundred Thirty-Three Million, Three Hundred Thirty Three Thousand Three Hundred Thirty-Three United States Dollars ($133,333,333 USD) (i.e., with an aggregate value of $166,666,666 USD), Company’s Participation Rights for such Calendar Quarter would be thirty-two and sixty-seven tenths of one percent (32.67%) (i.e., 2/3 ($166,666,666 USD / $250,000,000 USD) of 49%).

 

 

 

 

 

 

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[***] = Certain Confidential Information Omitted

 

ARTICLE 3.

GUARANTEED MINIMUM PARTICIPATION RIGHTS 

 

3.1“Guaranteed Minimum Participation Rights” (also referred to herein as “GMPR(s)”) shall be defined as non-returnable advances payable by ABG to Company recoupable against Participation Rights earned in the same Contract Year, or, in accordance with Section 3.3 or the third sentence of this Section 3.1, subsequent Contract Years. Subject to Section 3.2 below, for each of the first ten (10) Contract Years during the Term, the GMPR shall be Ten Million United States Dollars ($10,000,000 USD) payable pursuant to Section 3.5 below. For the remainder of the Term (i.e., after the first 10 Contract Years), there shall not be GMPRs and, subject to the terms and conditions contained herein, Company shall be entitled to the actual earned Participation Rights for such Contract Year(s) except for any GMPR Shortfall (as hereinafter defined) that may be carried from prior Contract Years pursuant to Section 3.3.

 

3.2Notwithstanding the foregoing or anything to the contrary contained herein, in any Calendar Quarter, Company shall only be entitled to its [***] (as hereinafter defined). [***].

 

3.3GMPR Shortfall Carry-Forward. ABG shall be required to make GMPR payments to Company as and when required hereunder. In the event that the GMPR actually paid to Company in any given Contract Year is greater than the Participation Rights actually earned and paid to Company in the same Contract Year (the difference between Company’s actual earned and received Participation Rights and GMPR shall be defined herein as a “PR Shortfall”), then ABG shall carry any un-recouped PR Shortfall to the immediately succeeding Contract Year during the Term (and ABG shall continue to carry such un-recouped PR Shortfall to successive Contract Years during the Term, to the extent the same has not yet been fully recouped), and to the extent Company has any PR Overages (as hereinafter defined) in any Contract Year to which such PR Shortfall has been carried, ABG shall apply such PR Overages to such PR Shortfall; it being understood that if PR Overages exceed the PR Shortfall, then ABG shall be required to pay the balance of the PR Overages to Company pursuant to the terms of this Agreement. “PR Overage(s)” shall be defined as any Participation Rights actually earned by Company in a given Contract Year, which Participation Rights are in excess of the GMPR for the same Contract Year.

 

3.4For the avoidance of doubt, in any given Contract Year, once ABG has paid to Company the total amount of the GMPR for such Contract Year (whether by way of quarterly GMPR payments, Participation Rights in excess of the GMPR, or either or both of the foregoing): (i) ABG shall no longer be required to make quarterly GMPR payments to Company for that Contract Year and (ii) for the remainder of such Contract Year, ABG shall pay Company based on actual earned Participation Rights.

 

3.5ABG shall pay the GMPR to Company in equal quarterly installments each Calendar Quarter together with Quarterly Statements (as hereinafter defined). ABG hereby acknowledges that the GMPR is payable to Company even if ABG fails to enter into any Cannabis Licenses during the Term, and is a condition of Company entering into the Agreement.

 

ARTICLE 4.

PAYMENTS; AND FINANCIAL STATEMENTS

 

4.1Payments by ABG. ABG will pay all amounts due to Company pursuant to the Participation Rights and GMPRs, as set forth in this Agreement, within [***] following the expiration of each Calendar Quarter during the Term so long as none of Company or any of its Affiliates are then in any uncured breach of its respective payment obligations under any Company License Agreement (as defined in Section 5.1 below). ABG will pay all sums then due and owing to Company pursuant to this Agreement by wire transfer in accordance with the wire instructions and bank account information provided to ABG by Company in writing as set forth on Exhibit C, attached hereto and incorporated herein by reference (“Bank Account”) which Company may update from time to time by written notice to ABG. 

 

4.2Accounting. ABG shall prepare and maintain complete and accurate books of account and records (including the originals or copies of documents supporting entries in the books of account) covering all transactions relating to this Agreement. ABG will compute the

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[***] = Certain Confidential Information Omitted

 

amount due to Company in accordance with Articles 2 and 3 above and furnish to Company within [***] following the end of each Calendar Quarter during the Term and continuing until all payments required hereunder are made, a complete and accurate statement (each, a “Quarterly Statement”). Each Quarterly Statement will include the following information: (a) revenue calculation and quantity invoiced and applicable royalties and revenues received by ABG or its Affiliates during the preceding Calendar Quarter; and (b) a Net Cannabis Revenue calculation. On reasonable request from Company, and from time to time, ABG will provide Company with backup and support materials with respect to any item contained in any Quarterly Statement, such that Company will have sufficient information to evaluate the sources of any item contained in such Quarterly Statement. Such Quarterly Statements will be accompanied by a certification signed by ABG’s chief financial officer (or equivalent) indicating that he or she has reviewed and agrees with all the information contained in such Quarterly Statement.

 

4.3Audit Rights. Company shall have the right to inspect and audit ABG’s books of account solely in connection with payments made to Company pursuant to Section 4.1 hereof and as so far as they relate to Company’s Participation Rights, no more frequently than [***] during any [***] period upon no less than [***] prior written notice to ABG and at ABG’s principal offices during ABG’s normal business hours at Company’s sole expense, unless [***].

 

4.4Objections to Quarterly Statements. If Company has any objection to a Quarterly Statement during a Contract Year, then Company shall give ABG specific notice of that objection and reasons for it within [***] from the date that Company received the Quarterly Statement for the final Calendar Quarter of such Contract Year (except if pursuant to an audit conducted by Company in accordance with Section 4.3 in which case Company shall have [***] from the date such audit was completed to submit such notice to ABG) and in each case, the Parties shall meet and discuss (either telephonically or in-person) any objections and work to resolve any such objections in good faith.

 

ARTICLE 5.

PRE-NEGOTIATED CANNABIS PRODUCTS LICENSE TERMS

 

5.1The Parties each acknowledge and agree that during the Term, Company (or its Affiliates) may wish to enter into license agreement(s) with ABG or its appropriate Affiliate(s) in connection with the design, manufacture, distribution and sale of Cannabis Products bearing the intellectual property rights of Company Participating Brand(s) (each, a “Company License Agreement”).

 

5.2In the event Company wishes to enter into a Company License Agreement, the Parties shall negotiate the same in good faith; provided, however, and ABG hereby acknowledges and agrees that, unless the Parties mutually agree otherwise, and subject to Article 6 below, the royalty rate in all Company License Agreements (i.e., for all Company Participating Brands) shall be [***] (and, for the avoidance of doubt [***] and Company shall not be required to pay any guaranteed minimum royalties (i.e., non-returnable advances recoupable against royalties earned) such that royalties are paid to ABG as earned. Notwithstanding the foregoing or anything to the contrary contained herein, in the event that ABG acquires ownership or control of a majority interest in any brand and Company or any of its Affiliates has a license agreement with respect to such brand’s Cannabis Products, the terms of such agreement shall remain in place and such brand shall not be subject to this Section 5.2.

 

5.3Notwithstanding Section 5.2 above, the following shall apply:

 

(a)Specifically in connection with the Partnered Brands (as hereinafter defined) the Parties hereby acknowledge and agree that, unless the Parties mutually agree otherwise and subject to Article 6 below, the royalty rate for all Cannabis License Agreements shall be [***]. “Partnered Brands” shall be defined as the following ABG 2018 Brands: [***].

 

	
 
	
(b)
	
(i)Specifically in connection with the Minority Stakeholder Brands (as hereinafter defined) the Parties hereby acknowledge and agree that, unless the Parties mutually agree otherwise and subject to Section 6.2 below, the royalty rates for all Cannabis License Agreements shall be [***], unless ABG receives any bona fide offer from a Comparable Third Party (as hereinafter defined) for the applicable Minority Stakeholder Brand (each, a “Third-Party Offer”). In such instance, the royalty rate(s) contained in the Third-Party Offer 

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[***] = Certain Confidential Information Omitted

 

	
 
		
shall apply, it being understood however, that in the event the royalty rate(s) contained in the Third-Party Offer are less than [***]. Further to the foregoing, “Minority Stakeholder Brands” shall be defined as the ABG 2018 Brands set forth on Exhibit D, and any Then-Current Brands in which ABG or its Affiliates owns or controls a majority interest (but not, for the avoidance of doubt, all ownership interests). “Comparable Third Party” as used herein means a third-party of comparable creditworthiness and reputation to Company, to be determined by ABG in its reasonable, good faith discretion. For the avoidance of doubt, nothing in this Section 6.2 shall supersede or conflict with Company’s rights described in Section 6.2. For the avoidance of doubt, those Minority Stakeholder Brands which are also Partnered Brands shall be governed by this Section 5.3(b).

 

(ii) For the avoidance of doubt, notwithstanding anything to the contrary contained herein, the following shall apply: 

 

(A)in the event ABG receives any Third-Party Offer, ABG shall promptly notify Company of the same; and

 

(B)in connection with Minority Stakeholder Brands, notwithstanding anything to the contrary contained in Article 6, ABG shall be permitted to solicit, discuss and/or negotiate Cannabis License(s) for Cannabis Product(s) bearing such Minority Stakeholder Brands with Comparable Third Parties in order to potentially obtain Third-Party Offers.

 

5.4In connection with each Company License Agreement, if any, Company hereby acknowledges and agrees that Company (or its applicable Affiliate) must meet ABG’s then-current compliance requirements, including that Company shall comply with any and all applicable laws at the time of entering into such Company License Agreement and throughout the term thereof. 

 

ARTICLE 6.

[***]

 

6.1[***].

 

6.2[***].

 

6.3[***].

 

ARTICLE 7.

ABG AS REPRESENTATIVE OR SUBLICENSOR OF COMPANY FOR CANNABIS PRODUCTS & OTHER PRODUCTS

 

The Parties hereby acknowledge and agree that during the Term: (a) Company may wish to license the Company Trademarks in connection with the design, manufacture, distribution and sale of products other than Cannabis Products (collectively, “Other Products”) and/or Cannabis Products; and (b) in connection with such licensing endeavors, Company may wish to engage ABG to perform certain services, including without limitation, acting as a sub-licensor, brand management, brand strategy, business development (e.g., outreach to ABG’s retail distribution network) and marketing. In the event Company desires to engage ABG to provide such services, the Parties shall negotiate in good faith appropriate remuneration to ABG, it being specifically understood that Company shall have no obligation to utilize or request such services from ABG and ABG shall have no obligation to provide such services. If the Parties mutually agree on terms for the provision of such services by ABG, then the same shall be expressly set forth in writing in an amendment to this Agreement or a services agreement between the Parties.

 

 

 

 

 

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[***] = Certain Confidential Information Omitted

 

ARTICLE 8.

GOOD FAITH NEGOTIATION OF PROFIT PARTICIPATION FOR FUTURE ABG BRANDS

 

8.1During the Term, ABG may acquire additional brands and in such event, Company may wish to purchase forty-nine percent (49%) of the Net Cannabis Revenue of some or all of the Future ABG Brands (specifically excluding the ABG 2018 Brands) (any such purchased rights with respect to the Then-Current Future Brands, the “Future ABG Brand Participation Rights”, and together with the ABG 2018 Brands Participation Rights, the “Participation Rights”). 

 

8.2During the Term, in the event ABG reasonably believes exercising good faith business judgment that it shall acquire any Future ABG Brands, ABG shall notify Company of the same no less than [***] prior to the tentative closing date of the transaction unless the circumstances do not permit such advance notice in which case ABG shall notify Company as soon as commercially practicable. In connection with any acquisition of Future ABG Brands, ABG shall use all commercially reasonable efforts to ensure that there will be no restrictions regarding exploitation of such Future ABG Brands in connection with Cannabis Products; provided, however, and Company acknowledges and agrees that (a) in connection with the acquisition of celebrity brands (of living or deceased celebrities), the sale of such brand may be conditioned upon certain brand restrictions related to Cannabis Products which ABG may be unable to negotiate to remove; and (b) ABG makes no representation or warranty to Company or otherwise that there shall not be any restrictions as a result of third-party trademark registrations, common law rights of third parties in and to the Future ABG Brand Trademarks related to cannabis Products or existing contractual restrictions related to Cannabis Products. 

 

8.3During the Term, in the event ABG acquires any Future ABG Brands, promptly following the closing date of any such transaction, ABG shall notify Company of the same (each, an “Acquisition Notice”). In the event Company wishes to purchase the Future ABG Brand Participation Rights for such brand(s), then Company shall respond to ABG’s Acquisition Notice within [***] of Company’s receipt of the Acquisition Notice indicating such interest, it being understood during such [***] period, at Company’s request, subject to ABG and Company entering into a customary non-disclosure agreement reasonably satisfactory to ABG, ABG shall use commercially reasonable efforts to provide any projections ABG may have for Cannabis Products for such Future ABG Brand(s), historical data on Cannabis Products bearing such Future ABG Brand(s), if any and any other data, materials or agreements which Company may reasonably request. In the event Company responds expressing interest in purchasing the Future ABG Brand Participation Rights for the Future ABG Brand(s) specified in the Acquisition Notice, the Parties shall negotiate the terms and conditions of the same in good faith, including, without limitation, the purchase price for the Future ABG Brand Participation Rights and potentially an increase to the GMPRs.

 

8.4In the event that the Parties mutually agree on terms and conditions in connection with Company acquiring Future ABG Brand Participation Rights in accordance with Section 8.3, ABG hereby acknowledge and agrees that Company may elect to pay the purchase price for such Future ABG Brand Participation Rights by foregoing and applying some or all Participation Rights payments under this Agreement in excess of all GMPR(s) to the payment of such purchase price until Company has foregone and applied an amount of Participation Rights equal to the purchase price plus a per annum interest rate (the “Company Borrow Rate”) accruing on all unpaid portions of the purchase price equal to such rate identified in (i) the Second Lien Credit Agreement dated December 29, 2017 among ABG Intermediate Holdings 2 LLC, as borrower, ABG Intermediate Holdings 1 LLC, as holdings, and Bank of America, N.A., as administrative agent, and the other parties thereto, subject to such adjustments and/or amendments thereto (the “Second Lien Credit Agreement”) or (ii) such other agreement as ABG  or its Affiliate(s) may negotiate in lieu of the Second Lien Credit Agreement, from time to time, to facilitate debt financing for the purpose of Future ABG Brands or other mergers and acquisition activities.  For the avoidance of doubt, as of the date of full and complete execution hereof, such Company Borrow Rate was [***]% per annum.

 

8.5For the avoidance of doubt, in the event that Company does not acquire Future ABG Brand Participation Rights for any Future ABG Brands, the same Future ABG Brands shall nonetheless be subject to Article 6.

 

 

 

 

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ARTICLE 9.

SALE BY ANY ABG AFFILIATE(S) OF ANY THEN-CURRENT BRANDS

 

9.1Other than in the event of an ABG Change of Control pursuant to Article 12 hereof, in the event, during the Term, a person or entity (“Brand Purchaser”), in one or a series of related transactions, directly or indirectly, acquires a controlling interest in any Affiliate or a group of Affiliates of ABG’s assets, (a) such Brand Purchaser will assume the rights and obligations of such Affiliate(s) of ABG under this Agreement, including without limitation, the payment obligations with respect to the Participation Rights; and (b) the Participation Rights payable by ABG to Company hereunder, including without limitation, the GMPRs payable, for each Calendar Quarter from and after the closing date of such transaction shall be reduced by the amount payable by the Brand Purchaser to Company attributable to the same Calendar Quarter.  

 

9.2In the event, in any Calendar Quarter, the Participation Rights, including the GMPRs, paid to Company by ABG results in an overpayment (i.e., as a result of Company having received any amounts from the Acquiring Party of any Affiliates of ABG pursuant to Section 9.1 above), ABG shall have the right to reduce the next quarterly payment to Company by such amount.

 

ARTICLE 10.

COMPANY AS PREFERRED SUPPLIER IN CANNABIS LICENSE AGREEMENTS 

 

10.1Preferred Supplier. [***].

 

10.2Company Branded-Cannabis Products. 

 

(a)Subject to Section 10.4 below, ABG shall use commercially reasonable efforts in good faith, at Company’s request and sole discretion and in accordance with applicable laws, to contractually require the front of the packaging for Licensed Cannabis Products made with Cannabis Ingredients supplied by Company to include Company’s or its Affiliates’ name, logo or other reasonable preferred branding (e.g., “Powered by Tilray”). In the event ABG contractually requires the same, the Parties shall discuss, in good faith, the grant of rights in the applicable Company Trademark(s) to the third-party licensee and the enforcement of Company’s brand standards and guidelines for the same.

 

(b)In the event the packaging for Licensed Cannabis Products includes or at any time has included Company’s or its Affiliate’s name, logo or other reasonable preferred branding (e.g., “Powered by Tilray”) and pursuant to Section 10.4 below, the third-party licensee purchases the Cannabis Ingredients for such Licensed Cannabis Products from a third-party supplier (i.e., other than Company), such third-party Cannabis Ingredients shall meet Company’s then-current standard operating procedures applicable to the Company’s own Cannabis Ingredients of the same kind.

 

10.3Pricing. The pricing for Cannabis Ingredients supplied by Company in accordance with Section 10.1 shall be the fair market value of such Cannabis Ingredients at the time of sale.

 

10.4[***].

 

ARTICLE 11.

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

11.1Representations, Warranties and Covenants of ABG. ABG hereby represents, warrants and covenants to Company, the following:

 

(a)it owns or controls all right, title and interest in and to the Existing Trademarks and, subject to 11.1(b), it shall use commercially reasonable efforts to own or control all right, title and interest in and to the Company Participating Trademarks (specifically excluding the Existing Trademarks). It is authorized to enter into this Agreement and to grant the Participation Rights granted to Company herein. It has not sold, assigned, leased or in any manner disposed of or encumbered the Participation Rights granted to Company herein, and is 

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otherwise under no disability, restriction or prohibition from entering into or performing its obligations under this Agreement;

 

(b)in connection with those ABG 2018 Brands for which ABG or its Affiliates do not have the right to exploit the same in connection with certain Cannabis Products as a result of ABG or its Affiliate lacking trademark registration(s) and/or common law rights in the applicable jurisdiction and for which Company or a third party wishes to enter into a Cannabis License, ABG shall use commercially reasonable, good faith efforts to register the applicable Then-Current Brand Trademark in the appropriate trademark class(es) for the applicable Cannabis Product(s) it being specifically understood that (i) ABG makes no representation or warranty that ABG will be successful in obtaining new trademark registration(s) in the appropriate classes in any jurisdiction(s); and (ii) ABG has no control over the timeline to secure trademark registrations in any jurisdiction;

 

(c)it has taken commercially reasonable action to maintain and protect its intellectual property rights in the Existing Trademarks and it shall take commercially reasonable action to maintain and protect its intellectual property rights in the Company Participating Trademarks during the Term;

 

(d)to the knowledge of ABG, the Existing Trademarks do not materially interfere with, infringe upon, misappropriate, or otherwise conflict with any intellectual property rights of any other person or entity. To the knowledge of ABG, no other person or entity is interfering with, infringing upon, misappropriating or otherwise in conflict with any intellectual property rights of the Existing Trademarks; 

 

(e)it shall contractually require all third-party licensees pursuant to Cannabis Licenses to covenant to ABG that the design, manufacture, distribution, advertising, marketing, assembly, packaging, labeling, boxing, crating, marking, packing, shipping, import, export, storage, purchase and sale of all Cannabis Products subject to any such Cannabis License will comply with all applicable laws; 

 

(f)it will use commercially reasonable efforts to ensure that all products sold using the ABG 2018 Brands will be of quality in design, material and workmanship that is equal to or higher than the products manufactured and sold using the Existing Trademarks before the date of this Agreement; and no injurious deleterious or defamatory material, writing or images will be used in or on the ABG 2018 Brands; and 

 

(g)during the Term, it will provide Company with no less than [***] written notice and engage in reasonable consultation with Company prior to executing any agreement that would result in commissions paid and/or credited to unaffiliated third parties in connection with Gross Cannabis Revenue.

 

11.2Representations, Warranties and Covenants of the Parties. Each Party hereby represents, warrants and covenants to the other that: 

(a)it is duly organized, validly existing and in good standing under the laws of its state of organization; 

 

(b)it has the full power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and this Agreement constitutes the valid and legal binding obligation of such enforceable in accordance with the terms and conditions set forth herein;

 

(c)ABG or its Affiliates have the right to exploit certain ABG 2018 Brands in connection with certain Cannabis Products without any limitation and without obtaining the consent of any third party;

 

(d)it is not required to give any notice to, make any filing with or obtain any authorization, consent or approval of any authority, person or entity in order for such Party to consummate the transactions set forth herein; 

 

(e)the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated by this Agreement will not (i) violate in any material respect any law to which it subject; (ii) violate or result in a breach of or default or acceleration under its Certificate of Formation, Limited Liability Agreement/Operating Agreement (as applicable), any resolutions adopted by its members of managers 

9

 

[***] = Certain Confidential Information Omitted

 

or any instrument or agreement to which it is a party or by which the it  is bound; or (iii) violate any judgment, order, injunction, decree or award against or binding upon it; and

 

(f)it is as of the Effective Date in compliance with, and throughout the Term, it will comply with any and all applicable laws, and it will not engage in any cannabis activities in the United States unless permitted under applicable federal and state law;

 

11.3Representations, Warranties and Covenants of Company. Company hereby represents, warrants and covenants to ABG that:

 

(a)it has substantial knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of an investment in the Participation Rights; and it has substantial net worth such that it can bear the economic risk of its purchase of the Participation Rights;

 

(b)it has had the opportunity to ask representatives of ABG certain questions and request certain information regarding the terms and conditions of this Agreement and the finances, operations, business and prospects of ABG and has had any and all such questions and requests answered to its satisfaction; and that it understands the risks and other considerations relating to the purchase of the Participation Rights;

 

(c)it owns or controls all right, title and interest in and to the Company Trademarks;

 

(d)it has taken commercially reasonable action to maintain and protect its intellectual property rights in the Company Trademarks and it shall take commercially reasonable action to maintain and protect its intellectual property rights in the Company Trademarks during the Term;

 

(e)to the knowledge of Company, the Company Trademarks do not materially interfere with, infringe upon, misappropriate, or otherwise conflict with any intellectual property rights of any person or entity. To the knowledge of Company, no other person or entity is interfering with, infringe upon, misappropriating or otherwise in conflict with any intellectual property rights of the Company Trademarks; and

 

(f)it will use commercially reasonable efforts to ensure that all products sold using the Company 2018 Brands will be of quality, design, material and workmanship that is equal to or higher than the products manufactured and sold using the Company Trademarks before the Effective Date, and no injurious, deleterious or defamatory material, writing or images will be used in or on the Company 2018 Brands.

 

11.4No Representations. Except for the representations and warranties contained in this Article 10 or as set forth in the Payment Agreement, neither Party nor any other Person makes any express or implied representation or warranty with respect to such Party, and each Party hereby disclaims any such other representations or warranties, whether written or oral.  In particular, without limiting the foregoing disclaimer, neither Party nor any other Person makes or has made any representation or warranty to the other Party or any of their Affiliates or representatives (except for the representations and warranties made contained in this Article 11 or as set forth in the Payment Agreement), including in any oral or written information presented to the other Party or any of their Affiliates or representatives in the course of their due diligence investigation, the negotiation of this Agreement or in the course of the transactions contemplated hereby.  

 

ARTICLE 12.

CHANGE OF CONTROL

 

12.1Solely in the event of a Change of Control of ABG, ABG may assign this agreement and all rights and obligations of ABG to the Acquiring Party or its Affiliate and the Acquiring Party will assume the obligations of ABG herein unless ABG continues to honor this Agreement or Company and ABG agree on other mutually acceptable terms.

 

12.2Solely in the event of a Change of Control of Company, Company may assign this agreement and all rights and obligations of Company to the Acquiring Party or its Affiliate (provided that to the extent ABG cannot contractually comply with Article 5 and/or Article 6 hereof with the Acquiring Party or Affiliate because of the 

10

 

[***] = Certain Confidential Information Omitted

 

identity of the assignee, Company shall not have the right to assign the rights contain in such Articles to the Acquiring Party or such Affiliate). In the event of such assignment, the Acquiring Party will assume the obligations of Company herein unless Company and ABG agree on other mutually acceptable terms.

 

ARTICLE 13.

INDEMNIFICATION

 

13.1Company’s Indemnity Obligation. Company will indemnify, defend and hold harmless ABG and its parents, subsidiaries, affiliated companies and their respective officers, directors, shareholders, employees, agents, attorneys, successors and assigns (each, individually, an “ABG Indemnified Party”) from and against any and all claims, liabilities, demands, causes of action, judgments, settlements, costs and expenses (including, without limitation, reasonable attorney’s fees and court costs) arising solely out of: (a) the breach by Company of a representation, warranty or covenant in this Agreement; and (b) the failure by Company to perform any of its obligations under this Agreement.  Company’s liability to any ABG Indemnified Party under this Section 13.1 will be reduced to the extent that: (y) any loss, claim, damage, liability or expense is determined by a court of competent jurisdiction to result directly, in whole or in part, from any such ABG Indemnified Party’s willful misconduct or gross negligence; or (z) to the extent that ABG is required to indemnify Company pursuant to Section 13.2 below.  

 

13.2ABG’s Indemnity Obligation. ABG will indemnify, defend and hold harmless Company from and against any and all claims, liabilities, demands, causes of action, judgments, settlements, costs and expenses (including, without limitation, reasonable attorney’s fees and court costs) arising out of or in connection with: (a) the breach by ABG of a representation, warranty or covenant in this Agreement; (b) the failure by ABG to perform any of its obligations under this Agreement; (c) the gross negligence, bad faith or unlawful conduct of ABG in connection with the performance of its obligations under this Agreement; (d) any claim related to the use of third party copyrighted materials on or in connection with the Then-Current ABG 2018 Brands; and (e) claims of copyright infringement, trademark infringement or other intellectual property infringement relating to the Company Participating Brands, except for claims arising out of a Company License Agreement.  ABG’s liability to Company under this Section 13.2 will be reduced to the extent that: (y) any loss, claim, damage, liability or expense is determined by a court of competent jurisdiction to result directly, in whole or in part, from Company’s willful misconduct or gross negligence; or (z) to the extent that Company is required to indemnify ABG pursuant to Section 13.1 above.

 

13.3Indemnification. The Party to be indemnified hereunder (the “Indemnitee”) must give the indemnifying Party hereunder (the “Indemnitor”) prompt written notice of any action, claim or proceeding brought against it for which it is entitled to indemnification hereunder, and the Indemnitor, in its sole discretion, then may take such action as it deems advisable under the circumstances to defend such action, claim or proceeding on behalf of the Indemnitee.  In the event that appropriate action is not taken by the Indemnitor within [***] after its receipt of written notice from the Indemnitee, the Indemnitee will have the right to defend such action, claim or proceeding, but no settlement thereof may be made without the prior written approval of the Indemnitor, which approval will not be unreasonably withheld, delayed or conditioned.  Even if appropriate action is taken by the Indemnitor, the Indemnitee may, at its own cost and expense, be represented by its own counsel in such action, claim or proceeding.  In any event, the Indemnitee and the Indemnitor will keep each other fully advised of all developments and will cooperate fully with each other in all respects in connection with any such action, claim or proceeding.  The provisions of this Section will survive any expiration or termination of this Agreement.

 

ARTICLE 14.

CONFIDENTIALITY

 

14.1Confidential Information. For purposes of this Agreement, "Confidential Information" shall be defined as, with respect to each Party: non-public and/or proprietary information relating to a Party’s business or operations, which information may be written, oral or maintained in electronic or any other form, which information is obtained, received, developed or derived by such Party, either directly or indirectly, by any means of communication or expression, prior to or during the Term of this Agreement, and shall include, without limitation: (a) finances, technology or other technical data, trade secrets, inventions, processes, formulas and know-how, (b) designs, drawings, services, products, product plans, product development, marketing, marketing plans and information, customers, potential business partners, market information, suppliers, vendors, retailers, manufacturers, factories, (c) 

11

 

[***] = Certain Confidential Information Omitted

 

all documents, analyses, reports, research, business plans, studies, diagrams, marketing information or other materials that contain information and (d) the existence of this Agreement and the terms hereof. All Confidential Information is and shall remain the property of the disclosing Party.

 

14.2Exclusions from Confidential Information. As used in this Agreement, the term ‘Confidential Information’ shall not include any information that: (a) now or hereafter becomes, through no unauthorized act by or on behalf of the receiving Party, generally known or available to the public; (b) known to the receiving Party, by lawful means, at the time the receiving Party receives the same from the disclosing Party; (c) furnished to the receiving Party by a third party that does not have an obligation of confidentiality to the disclosing Party with respect thereto; or (d) independently developed by the receiving Party without use of or access to the disclosing Party’s Confidential Information.

 

14.3Obligations. Each Party acknowledges that it may have access to the other Party’s Confidential Information, the value of which may be impaired by misuse, or by disclosure to a third party. The receiving Party agrees that it will not disclose such Confidential Information, except that the receiving Party may disclose the other Party’s Confidential Information in order to perform the receiving Party’s obligations under this Agreement, but solely to those who: (a) have a "need to know" such Confidential Information, (b) are instructed and have agreed, in writing, not to disclose the Confidential Information, or use the Confidential Information for any purpose other than pursuant to the terms of this Agreement. The receiving Party shall take reasonable precautions to protect the confidentiality of the other Party’s Confidential Information. Such precautions may, if requested by the disclosing Party, include the use of separate written confidentiality agreements, in a form approved by the disclosing Party. Following the expiration or termination of this Agreement, no Party shall disclose or use any of the other Parties’ Confidential Information for any purpose, unless otherwise agreed in writing by the disclosing Party. Each Party agrees to notify the other Party of the circumstances surrounding any inadvertent disclosure of Confidential Information by the receiving Party.

 

14.4Mandatory Disclosure. Nothing in this Agreement shall prevent the receiving Party from disclosing Confidential Information of the disclosing Party to the extent the receiving Party is required to do so by the rules of an applicable securities market or exchange, or is legally compelled to do so by any governmental investigative or judicial agency or court pursuant to proceedings over which such agency or court has jurisdiction; provided, however, that prior to any such disclosure, the receiving Party shall (a) assert the confidential nature of the Confidential Information to the market, exchange or agency or court; (b) promptly notify the disclosing Party in writing of the requirement, order or request to disclose; and (c) at the disclosing Party’s sole cost and expense (excluding the receiving Party’s outside attorney fees), cooperate fully with the disclosing Party in protecting against any such disclosure and/or obtaining a protective order narrowing the scope of the compelled disclosure and protecting the confidentiality of the Confidential Information.  Any Confidential Information that is disclosed under this Section shall otherwise remain subject to the provisions of this Agreement.

 

ARTICLE 15.

MISCELLANEOUS

 

15.1Relationship of the Parties. Except for the purposes described in Section 15.14, this Agreement does not constitute and will not be construed to constitute an agency, partnership, joint venture or any other type of unnamed relationship between ABG and Company.  Neither Party will have the right to obligate or to bind the other Party in any manner whatsoever, and nothing contained in this Agreement will give or is intended to give any rights of any nature to any third party.  Company shall have no control or input on the management of ABG.

 

15.2Press Releases and Other Communications.  ABG and Company shall agree on the timing, content and release of any press release or other public communication containing any information about this Agreement, the Parties, or their respective affiliates and related parties. No such release or communication shall be made without the prior written approval of each of ABG and Company. 

 

15.3Addresses and Notices.  All notices, requests, demands and other communications required or permitted to be made hereunder shall be in writing and shall be deemed duly given: (a) at the time of delivery, if hand delivered to the corporate office for the Party to whom Notice is being delivered, against a signed receipt therefor; (b) one (1) day after dispatch, if sent to the Party at the address and/or contact listed in this Agreement for 

12

 

[***] = Certain Confidential Information Omitted

 

such type of notice, by: (i) registered or certified mail, return receipt requested, first class postage prepaid, or (ii) nationally recognized overnight delivery service; or (c) at the time of transmission, if sent to the Party at the address and/or contact listed in this Agreement for such type of Notice, by e-mail transmission; provided, however, that any such notice sent by e-mail shall only be deemed duly given if a copy of such notice is also sent by one (1) or more methods pursuant to Sections 15.3(a) and/or 15.3(b) herein. Either Party may alter the address to which notices are to be sent hereunder by giving notice of such change to the other Party in conformity with the provisions of this Section. Notices shall be sent to the address specified below: 

 

If to Company for required notices then to:

200-49 Spadina Avenue

Toronto, ON, Canada M5V 2J1

Attn: Legal Department

Via Email: 

 

If to ABG, for required Notices then to:

1411 Broadway, 4th Floor 
New York, NY 10018 

Attn: Legal Department
Via Email: 

15.4Assignment.  Neither Party may assign this Agreement to a third party without the prior written consent of the other Party, which consent may be withheld for any reason or no reason; provided, that any assignment in accordance with Article 12 shall not require the consent of any Party. Any assignment in violation of the foregoing shall be void.

 

15.5Governing Law.  This Agreement and the legal relations among the Parties will be governed by and construed in accordance with the laws of the State of New York, notwithstanding any conflict of Law provisions to the contrary. The Parties hereby agree that any action which in any way involves the rights, duties and obligations of any Party under this Agreement shall be brought in courts located in New York County, New York, and the Parties hereby submit to the personal jurisdiction of such courts. Each of the Parties waives any objection that it may have based on improper venue or forum non conveniens to the conduct of any such suit or action in any such court. The Parties agree that service of process deposited in certified or registered mail addressed to the other Party at the address for the other Party set forth in this Agreement shall be deemed valid service of process for all purposes.

 

15.6Default Expenses. If either Party defaults with respect to any obligation under this Agreement, the defaulting Party will indemnify the other Party against and reimburse it for all reasonable attorney’s fees and all other costs and/or expenses resulting or made necessary by the bringing of any action, motion or other proceeding to enforce any of the terms, covenants or conditions of this Agreement.

 

15.7Entire Agreement. This Agreement sets forth the entire agreement and understanding between the Parties with respect to the subject matter hereof, and supersedes all prior agreements, understandings, inducements and conditions, whether express or implied, oral or written, except as herein contained.  The express terms hereof will control and supersede any course of performance and/or usage of trade inconsistent with any of the terms hereof.

 

15.8Amendment and Modification. This Agreement may be amended, modified and supplemented only by written agreement duly executed and delivered by each of the parties hereto. 

 

15.9Waiver and Delays.  A waiver by any Party of any of the terms and conditions of, or rights under, this Agreement will not be effective unless signed by the Party waiving such term, condition or right and will not bar the exercise of the same right on any subsequent occasion or any other right at any time or be deemed or construed to be a waiver of such terms or conditions for the future. Neither the failure of nor any delay on the part of any Party to exercise any right, remedy, power or privilege under this Agreement will operate as a waiver thereof, nor will any 

13

 

[***] = Certain Confidential Information Omitted

 

single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege.

 

15.10Severability.  If any term or provision of this Agreement, as applied to either Party or any circumstance, for any reason will be declared by a court of competent jurisdiction to be invalid, illegal, unenforceable, inoperative or otherwise ineffective, that provision will be eliminated to the minimum extent necessary so that this Agreement will otherwise remain in full force and effect and enforceable; provided, however, that if any term or provision of this Agreement pertaining to the payment of monies to either Party will be declared invalid, illegal, unenforceable, inoperative or otherwise ineffective, such Party will have the right to terminate this Agreement as provided herein.

 

15.11Form and Construction.  Paragraph and subparagraph headings in this Agreement are included for ease of reference only and do not constitute substantive matter to be considered in construing the terms of this Agreement.  As used in this Agreement, the masculine gender will include the feminine and the singular form of words will include the plural, or vice versa, as necessary in order that this Agreement may be interpreted so as to conform to the subject matter actually existing.  The language of this Agreement will be construed as a whole and not strictly for or against any of the parties.

 

15.12Counterparts.  This Agreement may be executed in one or more counterparts, each of which will be an original, but all of which together will constitute one Agreement binding on all parties hereto.  Each of the Parties agrees that a photographic or facsimile copy of the signature evidencing a Party’s execution of this Agreement will be effective as an original signature and may be used in lieu of the original for any purpose. 

 

15.13Exhibits.  All Exhibits referenced in this Agreement are hereby incorporated by reference into, and made a part of, this Agreement.

 

15.14Tax Treatment.  Solely for U.S. federal, and all applicable state and local, income tax purposes, the Parties intend and agree that (a) the transactions described in Articles 2, 3 and 4 shall be treated, in accordance with the principles of Revenue Ruling 99-5, Situation 1, (i) as the acquisition by Company of an undivided interest in the Then-Current 2018 Brands, to the extent, and solely in respect of, any present or future Cannabis Licenses entered into by ABG with respect to such Then-Current 2018 Brands during the Term, (ii) then a contribution by the Company and ABG of their respective interests in the Then-Current 2018 Brands, to the extent, and solely in respect of, any present or future Cannabis Licenses entered into by ABG with respect to such Then-Current 2018 Brands during the Term, to an entity treated as a partnership, (iii) with the operations contemplated under this clause (a) owned by the partnership which owns the Then-Current 2018 Brands, to the extent of and pursuant to the contributions under sub-clause (ii), and which is required to make the payments described in Articles 2 and 3 and (b) that any payment made by Company with respect to the Participation Rights after the date hereof in accordance with the terms of the Payment Agreement shall, consistently herewith, be treated as the sale of partnership interests in the partnership formed pursuant to clause (a) hereof.  The Parties agree to file all their U.S. federal, and applicable state and local, income tax returns in accordance with this Section 15.14, and to reasonably consult with each other to ensure tax reporting consistently herewith. ABG will consider in good faith comments from Company in connection with tax returns and tax audits of the tax partnership (which filings ABG will make good faith efforts to share with Company in advance and of which tax audits ABG will make good faith efforts to notify Company) and ABG will act in respect of the tax partnership in a manner consistent with the economic terms of this Agreement and reasonably cooperate with Company in connection with such matters. The Parties acknowledge and agree that treatment as a tax partnership shall be for U.S. federal, and applicable state and local, income taxes only and no partnership entity will be established or formed.

 

15.15Transaction Expenses.  Each Party will be responsible for its own expenses relating to the negotiation of this Agreement.

 

 

[Remainder of Page Intentionally Blank; Signature Page to Follow]

14

 

[***] = Certain Confidential Information Omitted

 

The undersigned Parties have executed this Agreement, effective as of the date first above written.

 

ACCEPTED AND AGREED:ACCEPTED AND AGREED:

 

ABG Intermediate Holdings 2, LLCTilray, Inc.

 

By: /s/ Jamie Salter__________By: /s/ Brendan Kennedy____

Name: Jamie Salter__________Name: Brendan Kennedy____      

Title: C.E.O._______________Title: CEO_______________

 

15

 

[***] = Certain Confidential Information Omitted

 

This Exhibit A is attached to and made part of the Profit Participation Agreement between ABG Intermediate Holdings 2, LLC (“ABG”) and Tilray, Inc. (“Company”) dated January 14, 2019.

 

EXHIBIT A

 

ABG 2018 Brands

 

The ABG 2018 Brands shall consist of the following brands and any other brands which ABG owns or controls the right, title and interest in and to the Existing Trademarks: 1

 

1.STATE

Above the Rim

Adrienne Vittadini

Aeropostale

Airwalk

Bandolino

Cece

Chaus

Corso Como

Drexel

Dukes

Elvis Presley

Enzo Angiolini

Frye

Frederick’s of Hollywood

Greg Norman

Hart Shaffner Marx

Henredon

Herve Leger

Hickey Freeman

Hind

Jones New York

Judith Leiber

Julius Erving (a/k/a Dr. J)

Juicy Couture

Louise et Cie

Misook

Muhammad Ali

Marilyn Monroe

Nautica

Neil Lane

Nine West

Prince (i.e., tennis brand)

Shaquille O’Neal

Silverstar

Sole / Society

Spyder

Sterling & Hunt

Taryn Rose

Thalia Sodi

Tretorn

Tapout

Thomasville

Vision Street Wear

	
	 

	
1 
	
 Additional brands (i.e., above and beyond the global and domestic brands listed above) to be provided by ABG 

16

 

[***] = Certain Confidential Information Omitted

 

 

This Exhibit B is attached to and made part of the Profit Participation Agreement between ABG Intermediate Holdings 2, LLC (“ABG”) and Tilray, Inc. (“Company”) dated January 14, 2019.

 

EXHIBIT B

 

PAYMENT AGREEMENT

 

[See Attached]

 

 

17

 

[***] = Certain Confidential Information Omitted

 

This Exhibit C is attached to and made part of the Profit Participation Agreement between ABG Intermediate Holdings 2, LLC (“ABG”) and Tilray, Inc. (“Company”) dated January 14, 2019.

 

EXHIBIT C

 

COMPANY BANK ACCOUNT

18

 

[***] = Certain Confidential Information Omitted

 

This Exhibit D is attached to and made part of the Profit Participation Agreement between ABG Intermediate Holdings 2, LLC (“ABG”) and Tilray, Inc. (“Company”) dated January 14, 2019.

 

EXHIBIT D

 

MINORITY STAKEHOLDER BRANDS

 

 

		
	
Minority Stakeholder Brand
	
ABG Ownership

	
[***]
	
[***]%

	
[***]
	
[***]%

	
[***]
	
[***]%

	
[***]
	
[***]%

	
[***]
	
[***]%

	
[***]
	
[***]%

	
[***]
	
[***]%

	
[***]
	
[***]%

	
[***]
	
[***]%

	
[***]
	
[***]%

 

 

 

19Exhibit 10.1

 

SECURITIES
PURCHASE AGREEMENT

 

This
Securities Purchase Agreement (this “Agreement”) is dated as of March 24, 2019, between Arcimoto, Inc., an Oregon
corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and collectively the “Purchasers”).

 

WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the “Securities Act”), the Company desires to issue and sell to each Purchaser,
and each Purchaser, severally and not jointly, desires to purchase from the Company, the Securities (as defined below) as more
fully described in this Agreement.

 

NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration
the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

 

ARTICLE
I.

DEFINITIONS

 

1.1 
Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following
terms have the meanings set forth in this Section 1.1:

 

“Acquiring
Person” shall have the meaning ascribed to such term in Section 4.5.

 

“Action”
shall have the meaning ascribed to such term in Section 3.1(j).

 

“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.

 

“Board
of Directors” means the board of directors of the Company.

 

“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action
to close.

 

“Closing”
means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

 

“Closing
Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable
parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii)
the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived, but in no event later
than the second (2nd) Trading Day following the date hereof.

 

    1

     

    

 

“Commission”
means the United States Securities and Exchange Commission.

 

“Common
Stock” means the common stock of the Company, no par value per share, and any other class of securities into which such
securities may hereafter be reclassified or changed.

 

“Common
Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to
acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument
that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive,
Common Stock.

 

“Company
Counsel” means Nelson Mullins Riley & Scarborough, LLP.

 

“Disclosure
Schedules” means the Disclosure Schedules of the Company delivered concurrently herewith.

 

“Disclosure
Time” means, (i) if this Agreement is signed on a day that is not a Trading Day or after 9:00 a.m. (New York City time)
and before midnight (New York City time) on any Trading Day, 9:01 a.m. (New York City time) on the Trading Day immediately following
the date hereof and (ii) if this Agreement is signed between midnight (New York City time) and 9:00 a.m. (New York City time)
on any Trading Day, no later than 9:01 a.m. (New York City time) on the date hereof.

 

“Evaluation
Date” shall have the meaning ascribed to such term in Section 3.1(s).

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Exempt
Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company
pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of
Directors or a majority of the members of a committee of non-employee directors established for such purpose for services rendered
to the Company, (b) securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding
on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other
than in connection with stock splits or combinations) or to extend the term of such securities, and (c) securities issued pursuant
to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that
such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that
require or permit the filing of any registration statement in connection therewith during the prohibition period in Section 4.11
herein, and provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself or
through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company
and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction
in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business
is investing in securities.

 

    2

     

    

 

“FCPA”
means the Foreign Corrupt Practices Act of 1977, as amended.

 

“Foley”
means Foley & Lardner LLP, with offices located at One Independent Drive, Suite 1300, Jacksonville, FL 32202.

 

“GAAP”
shall have the meaning ascribed to such term in Section 3.1(h).

 

“Indebtedness”
shall have the meaning ascribed to such term in Section 3.1(aa).

 

“Intellectual
Property Rights” shall have the meaning ascribed to such term in Section 3.1(p).

 

“Liens”
means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

“Material
Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).

 

“Material
Permits” shall have the meaning ascribed to such term in Section 3.1(n).

 

“Per
Share Purchase Price” equals $4.25, subject to adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or threatened.

 

“Prospectus”
means the final prospectus filed for the Registration Statement.

 

“Prospectus
Supplement” means the supplement to the Prospectus complying with Rule 424(b) of the Securities Act that is filed with
the Commission and delivered by the Company to each Purchaser at the Closing.

 

“Purchaser
Party” shall have the meaning ascribed to such term in Section 4.8.

 

“Registration
Statement” means the effective registration statement with Commission File No. 333-227683 (and includes any Rule
462(b) Registration Statement) which registers the sale of the Shares to the Purchasers.

 

    3

     

    

 

“Required
Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

 

“Rule
144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.

 

“Rule
424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.

 

“Rule
462(b) Registration Statement” means any registration statement prepared by the Company registering additional Securities,
which was filed with the Commission on or prior to the date hereof and became automatically effective pursuant to Rule 462(b)
promulgated by the Commission pursuant to the Securities Act.

 

“SEC
Reports” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Securities”
means the Shares.

 

“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Shares”
means the shares of Common Stock issued or issuable to each Purchaser pursuant to this Agreement, which shares shall be issued
free of any restrictive legends.

 

“Short
Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall
not be deemed to include locating and/or borrowing shares of Common Stock). 

 

“Subscription
Amount” means, as to each Purchaser, the aggregate amount to be paid for Shares purchased hereunder as specified below
such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds.

 

“Subsidiary”
means any subsidiary of the Company as set forth on Schedule 3.1(a), and shall, where applicable, also include any direct
or indirect subsidiary of the Company formed or acquired after the date hereof.

 

“Trading
Day” means a day on which the principal Trading Market is open for trading.

 

“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market
or the New York Stock Exchange (or any successors to any of the foregoing).

 

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“Transaction
Documents” means this Agreement, all exhibits and schedules thereto and hereto and any other documents or agreements
executed in connection with the transactions contemplated hereunder.

 

“Transfer
Agent” means Computershare Trust P.O. Box 505000, Louisville, KY 40233, and any successor transfer agent of the Company.

 

ARTICLE
II.

PURCHASE AND SALE

 

2.1 Closing.
On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution
and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly,
agree to purchase, up to an aggregate of $3,400,000 of Shares. Each Purchaser shall deliver to the Company, via wire transfer
of immediately available funds equal to such Purchaser’s Subscription Amount as set forth on the signature page hereto executed
by such Purchaser, and the Company shall deliver to each Purchaser its respective Shares, as determined pursuant to Section 2.2(a),
and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing. Upon satisfaction
of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur remotely by the exchange of electronic
mail and/or facsimile or at such other location and by such other means as the parties shall mutually agree.

 

2.2 Deliveries.

 

(a) On
or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:

 

(i) this
Agreement duly executed by the Company;

 

(ii) a
legal opinion of Company Counsel in form and substance reasonably acceptable to each Purchaser regarding the matters attached
hereto as Exhibit A;

 

(iii) the
Company shall have provided each Purchaser with the Company’s wire instructions, on Company letterhead and executed by the
Chief Executive Officer or Chief Financial Officer;

 

(iv) a
copy of the irrevocable instructions to the Transfer Agent instructing the Transfer Agent to deliver on an expedited basis via
The Depository Trust Company Deposit or Withdrawal at Custodian system (“DWAC”) Shares equal to such Purchaser’s
Subscription Amount divided by the Per Share Purchase Price, registered in the name of such Purchaser; and

 

    5

     

    

 

(v) the
Prospectus and Prospectus Supplement (which may be delivered in accordance with Rule 172 under the Securities Act).

 

(b) On
or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company, the following:

 

(i) this
Agreement duly executed by such Purchaser; and

 

(ii) such
Purchaser’s Subscription Amount by wire transfer to the account specified in writing by the Company.

 

2.3 Closing
Conditions.

 

(a) The
obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

 

(i) the
accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse
Effect, in all respects) on the Closing Date of the representations and warranties of the Purchasers contained herein (unless
as of a specific date therein in which case they shall be accurate as of such date);

 

(ii) all
obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been
performed; and

 

(iii) the
delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.

 

(b) The
respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being
met:

 

(i) the
accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse
Effect, in all respects) when made and on the Closing Date of the representations and warranties of the Company contained herein
(unless as of a specific date therein in which case they shall be accurate as of such date);

 

(ii) all
obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been
performed;

 

(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;

 

(iv) there
shall have been no Material Adverse Effect with respect to the Company since the date hereof; and

 

    6

     

    

 

(v) from
the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s
principal Trading Market, and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg
L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are
reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States
or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national
or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in
each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Securities at the
Closing.

 

ARTICLE
III.

REPRESENTATIONS AND WARRANTIES

 

3.1 Representations
and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed
a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding
section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:

 

(a) Subsidiaries.
All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a). The Company owns, directly
or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the
issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free
of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, all other references
to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.

 

(b) Organization
and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power
and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company
nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity
or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in
any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

    7

     

    

 

(c) Authorization;
Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder
and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders
in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction
Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in
accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii)
as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii)
insofar as indemnification and contribution provisions may be limited by applicable law.

 

(d) No
Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to
which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby
and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon
any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing
a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which
any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict
with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court
or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations),
or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii)
and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

 

    8

     

    

 

(e) Filings,
Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i)
the filings required pursuant to Section 4.4 of this Agreement, (ii) the filing with the Commission of the Prospectus Supplement,
(iii) application(s) to each applicable Trading Market for the listing of the Shares for trading thereon in the time and manner
required thereby, and (iv) such filings as are required to be made under applicable state securities laws (collectively, the “Required
Approvals”).

 

(f) Issuance
of the Securities; Registration. The Securities are duly authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company. The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable
pursuant to this Agreement. The Company has prepared and filed the Registration Statement in conformity with the requirements
of the Securities Act, which became effective on October 17, 2018 (the “Effective Date”), including the
Prospectus, and such amendments and supplements thereto as may have been required to the date of this Agreement. The Registration
Statement is effective under the Securities Act and no stop order preventing or suspending the effectiveness of the Registration
Statement or suspending or preventing the use of the Prospectus has been issued by the Commission and no proceedings for that
purpose have been instituted or, to the knowledge of the Company, are threatened by the Commission. The Company, if required by
the rules and regulations of the Commission, shall file the Prospectus with the Commission pursuant to Rule 424(b). At the time
the Registration Statement and any amendments thereto became effective, at the date of this Agreement and at the Closing Date,
the Registration Statement and any amendments thereto conformed and will conform in all material respects to the requirements
of the Securities Act and did not and will not contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not misleading; and the Prospectus and any amendments
or supplements thereto, at the time the Prospectus or any amendment or supplement thereto was issued and at the Closing Date,
conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain
an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The Company was at the time of the filing of the Registration
Statement eligible to use Form S-3. The Company is eligible to use Form S-3 under the Securities Act and it meets the transaction
requirements with respect to the aggregate market value of securities being sold pursuant to this offering and during the twelve
(12) months prior to this offering, as set forth in General Instruction I.B.6 of Form S-3.

 

    9

     

    

 

(g) Capitalization.
The capitalization of the Company as of the date hereof is as set forth on Schedule 3.1(g), which Schedule 3.1(g)
shall also include the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of
the date hereof. Except as set forth on Schedule 3.1(g), the Company has not issued any capital stock since its most recently
filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s
stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase
plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently
filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Securities and as set forth on Schedule 3.1(g), there are no outstanding options, warrants, scrip rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable
or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock or the capital stock
of any Subsidiary, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock or Common Stock Equivalents or capital stock of any Subsidiary. The issuance
and sale of the Securities will not obligate the Company or any Subsidiary to issue shares of Common Stock or other securities
to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under any of such securities. There are no outstanding securities or instruments of the Company
or any Subsidiary that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to redeem a security of the Company or such Subsidiary.
The Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan
or agreement. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval
or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities.
There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital
stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

 

(h) SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such
material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, together with
the Prospectus and the Prospectus Supplement, being collectively referred to herein as the “SEC Reports”) on
a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration
of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of
the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading. The Company has never been an issuer subject
to Rule 144(i) under the Securities Act. The financial statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect
at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified
in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries
as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case
of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

    10

     

    

 

(i) Material
Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included
within the SEC Reports, except as set forth on Schedule 3.1(i), (i) there has been no event, occurrence or development
that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant
to GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the
Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed
or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities
to any officer, director or Affiliate, except pursuant to existing Company stock option plans. The Company does not have pending
before the Commission any request for confidential treatment of information. Except for the issuance of the Securities contemplated
by this Agreement or as set forth on Schedule 3.1(i), no event, liability, fact, circumstance, occurrence or development
has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective
businesses, prospects, properties, operations, assets or financial condition that would be required to be disclosed by the Company
under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at
least 1 Trading Day prior to the date that this representation is made.

 

(j) Litigation.
Except as set forth on Schedule 3.1(j), there is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an “Action”). None of the Actions set forth on Schedule 3.1(j)
(i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities
or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither
the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim
of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been,
and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company
or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending
the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities
Act.

 

    11

     

    

 

(k) Labor
Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’
employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither
the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries
believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company
or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company
or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are
in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices,
terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(l) Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has
the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any
court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation
of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as
could not have or reasonably be expected to result in a Material Adverse Effect.

 

(m)Environmental
Laws.The Company and its Subsidiaries (i) are in compliance with all federal, state, local and foreign laws relating to
pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or
subsurface strata), including laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants,
contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment,
or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder (“Environmental
Laws”); (ii) have received all permits licenses or other approvals required of them under applicable Environmental Laws
to conduct their respective businesses; and (iii) are in compliance with all terms and conditions of any such permit, license
or approval where in each clause (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually
or in the aggregate, a Material Adverse Effect.

 

    12

     

    

 

(n) Regulatory
Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation
or modification of any Material Permit.

 

(o) Title
to Assets. Except as set forth in Schedule 3.1(o), the Company and the Subsidiaries have good and marketable title in fee
simple to all real property owned by them and good and marketable title in all personal property owned by them that is material
to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not
materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries and (ii) Liens for the payment of federal, state or other taxes, for which appropriate
reserves have been made therefor in accordance with GAAP and, the payment of which is neither delinquent nor subject to penalties.
Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting
and enforceable leases with which the Company and the Subsidiaries are in compliance.

 

(p) Intellectual
Property. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights
and similar rights necessary or required for use in connection with their respective businesses as described in the SEC Reports
and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).
None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual
Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2)
years from the date of this Agreement. Neither the Company nor any Subsidiary has received, since the date of the latest audited
financial statements included within the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Intellectual
Property Rights violate or infringe upon the rights of any Person, except as could not have or reasonably be expected to not have
a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is
no existing infringement by another Person of any of the Intellectual Property Rights. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except
where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

    13

     

    

 

(q) Insurance.
The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including,
but not limited to, directors and officers insurance coverage at least equal to the aggregate Subscription Amount. Neither the
Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without
a significant increase in cost.

 

(r) Transactions
With Affiliates and Employees. Except as set forth on Schedule 3.1(r), none of the officers or directors of the Company
or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a
party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or
personal property to or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case
in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option
plan of the Company.

 

(s) Sarbanes-Oxley;
Internal Accounting Controls. The Company and the Subsidiaries are in compliance in all material respects with any and all
applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable
rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the Closing
Date. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance
that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions
are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences. The Company and the Subsidiaries have established disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and
procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.
The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company
and the Subsidiaries as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such
date, the “Evaluation Date”). The Company presented in its most recently filed periodic report under the Exchange
Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the internal control over financial
reporting (as such term is defined in the Exchange Act) of the Company and its Subsidiaries that have materially affected, or
is reasonably likely to materially affect, the internal control over financial reporting of the Company and its Subsidiaries.

 

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(t) Certain
Fees. Except as set forth in the Prospectus Supplement, no brokerage or finder’s fees or commissions are or will be
payable by the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker,
bank or other Person with respect to the transactions contemplated by the Transaction Documents. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.

 

(u) Investment
Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will
not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject
to registration under the Investment Company Act of 1940, as amended.

 

(v) Registration
Rights. No Person has any right to cause the Company or any Subsidiary to effect the registration under the Securities Act
of any securities of the Company or any Subsidiary.

 

(w) Listing
and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration
of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating
terminating such registration. Except as set forth on Schedule 3.1(w), the Company has not, in the 12 months preceding
the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is, and
has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance
requirements. The Common Stock is currently eligible for electronic transfer through the Depository Trust Company or another established
clearing corporation and the Company is current in payment of the fees to the Depository Trust Company (or such other established
clearing corporation) in connection with such electronic transfer.

 

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(x) Application
of Takeover Protections. Except as described in the Prospectus, the Company and the Board of Directors have taken all necessary
action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision under the Company’s certificate of incorporation
(or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Purchasers
as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents,
including without limitation as a result of the Company’s issuance of the Securities and the Purchasers’ ownership
of the Securities.

 

(y) Disclosure.
Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel
with any information that it believes constitutes or might constitute material, non-public information which is not otherwise
disclosed in the Prospectus Supplement. The Company understands and confirms that the Purchasers will rely on the foregoing representation
in effecting transactions in securities of the Company. All of the disclosure furnished by or on behalf of the Company to the
Purchasers regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including
the Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under
which they were made, not misleading. The press releases disseminated by the Company during the twelve months preceding the date
of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they
were made and when made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.

 

(z) No
Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2,
neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering
of the Securities to be integrated with prior offerings by the Company for purposes of any applicable shareholder approval provisions
of any Trading Market on which any of the securities of the Company are listed or designated.

 

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(aa)Solvency.
Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder, will be solvent, able to pay its debts as they mature, and
have capital sufficient to carry on all businesses in which it is engaged. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of
its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization
or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. Schedule
3.1(aa) sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary,
or for which the Company or any Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness”
means (x) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred
in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness
of others, whether or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; and (z) the present value of any lease payments in excess of $50,000 due under leases required to
be capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

 

(bb)Tax
Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and local
income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is
subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined
to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the
payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There
are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of
the Company or of any Subsidiary know of no basis for any such claim.

 

(cc)Foreign
Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent
or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns
from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person
acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any
provision of FCPA.

 

(dd)Accountants.
The Company’s accounting firm is set forth on Schedule 3.1(dd) of the Disclosure Schedules. To the knowledge and
belief of the Company, such accounting firm (i) is a registered public accounting firm as required by the Exchange Act and (ii)
shall express its opinion with respect to the financial statements to be included in the Company’s Annual Report for the
fiscal year ending December 31, 2018.

 

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(ee)
Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the
Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby
and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities.
The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company
and its representatives.

 

(ff)Acknowledgment
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere
herein to the contrary notwithstanding (except for Sections 3.2(f) and 4.13 hereof), it is understood and acknowledged by the
Company that: (i) none of the Purchasers has been asked by the Company to agree, nor has any Purchaser agreed, to desist from
purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities
issued by the Company or to hold the Securities for any specified term; (ii) past or future open market or other transactions
by any Purchaser, specifically including, without limitation, Short Sales or “derivative” transactions, before or
after the closing of this or future private placement transactions, may negatively impact the market price of the Company’s
publicly-traded securities; (iii) any Purchaser, and counter-parties in “derivative” transactions to which any such
Purchaser is a party, directly or indirectly, presently may have a “short” position in the Common Stock, and (iv)
each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative”
transaction. The Company further understands and acknowledges that (y) one or more Purchasers may engage in hedging activities
at various times during the period that the Securities are outstanding and (z) such hedging activities (if any) could reduce the
value of the existing stockholders' equity interests in the Company at and after the time that the hedging activities are being
conducted.  The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.

 

(gg)Regulation
M Compliance.  The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or, paid any compensation for soliciting
purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase
any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Company’s
placement agent in connection with the placement of the Securities.

 

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(hh)Stock
Option Plans. Each stock option granted by the Company under the Company’s stock option plan was granted (i) in accordance
with the terms of the Company’s stock option plan and (ii) with an exercise price at least equal to the fair market value
of the Common Stock on the date such stock option would be considered granted under GAAP and applicable law. No stock option granted
under the Company’s stock option plan has been backdated. The Company has not knowingly granted, and there is no and has
been no Company policy or practice to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of
stock options with, the release or other public announcement of material information regarding the Company or its Subsidiaries
or their financial results or prospects.

 

(ii) Office
of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company's knowledge, any director, officer,
agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office
of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).

 

(jj)U.S.
Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s
request.

 

(kk)Bank
Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company
Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System
(the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly
or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent or
more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither
the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank
or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

 

(ll)Money
Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with
applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970,
as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money
Laundering Laws”), and no Action or Proceeding by or before any court or governmental agency, authority or body or any
arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of
the Company or any Subsidiary, threatened.

 

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3.2 Representations
and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as
of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein, in which case they
shall be accurate as of such date):

 

(a) Organization;
Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability
company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents
and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and
performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary
corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance
with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by
laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.

 

(b) Understandings
or Arrangements. Such Purchaser is acquiring the Securities as principal for its own account and has no direct or indirect
arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities (this representation
and warranty not limiting such Purchaser’s right to sell the Securities pursuant to the Registration Statement or otherwise
in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business.

 

(c) Purchaser
Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act.

 

(d) Experience
of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk
of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

 

(e) Access
to Information. Such Purchaser acknowledges that it has had the opportunity to review the Transaction Documents (including
all exhibits and schedules thereto) and the SEC Reports and has been afforded, (i) the opportunity to ask such questions as it
has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about the Company
and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to
evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire
without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. 

 

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(f) Certain
Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser has not,
nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed any
purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that
such Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting
forth the material terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof. Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions
made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above shall
only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement. Other than to other Persons party to this Agreement or to such Purchaser’s representatives,
including, without limitation, its officers, directors, partners, legal and other advisors, employees, agents and Affiliates,
such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including
the existence and terms of this transaction). Notwithstanding the foregoing, for the avoidance of doubt, nothing contained herein
shall constitute a representation or warranty, or preclude any actions, with respect to locating or borrowing shares in order
to effect Short Sales or similar transactions in the future.

 

The
Company acknowledges and agrees that the representations contained in this Section 3.2 shall not modify, amend or affect such
Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations
and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection
with this Agreement or the consummation of the transactions contemplated hereby. Notwithstanding the foregoing, for the avoidance
of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to locating
or borrowing shares in order to effect Short Sales or similar transactions in the future.

 

ARTICLE
IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1 [Intentionally
omitted].

 

4.2 Furnishing
of Information. Until the earliest of the time that no Purchaser owns Securities, the Company covenants to timely file (or
obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company
after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the
Exchange Act.

 

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4.3 Integration.
The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined
in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction
unless shareholder approval is obtained before the closing of such subsequent transaction.

 

4.4 Securities
Laws Disclosure; Publicity. The Company shall (a) by the Disclosure Time, issue a press release disclosing the material terms
of the transactions contemplated hereby, and (b) file a Current Report on Form 8-K, including the Transaction Documents as exhibits
thereto, with the Commission within the time required by the Exchange Act. From and after the issuance of such press release,
the Company represents to the Purchasers that it shall have publicly disclosed all material, non-public information delivered
to any of the Purchasers by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees
or agents in connection with the transactions contemplated by the Transaction Documents. In addition, effective upon the issuance
of such press release, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement,
whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, agents,
employees or Affiliates on the one hand, and any of the Purchasers or any of their Affiliates on the other hand, shall terminate.
The Company and each Purchaser shall consult with each other in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make any such
public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the
prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld
or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other
party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market, without the prior written consent of such Purchaser, except (a) as required by federal securities law in connection
with the filing of final Transaction Documents with the Commission and (b) to the extent such disclosure is required by law or
Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted
under this clause (b).

 

4.5 Shareholder
Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that
any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted
by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of
receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.

 

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4.6 Non-Public
Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction
Documents, which shall be disclosed pursuant to Section 4.4, the Company covenants and agrees that neither it, nor any other Person
acting on its behalf will provide any Purchaser or its agents or counsel with any information that constitutes, or the Company
reasonably believes constitutes, material non-public information, unless prior thereto such Purchaser shall have consented to
the receipt of such information and agreed with the Company to keep such information confidential. The Company understands and
confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.
To the extent that the Company delivers any material, non-public information to a Purchaser without such Purchaser’s consent,
the Company hereby covenants and agrees that such Purchaser shall not have any duty of confidentiality to the Company, any of
its Subsidiaries, or any of their respective officers, directors, agents, employees or Affiliates, or a duty to the Company, any
of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates not to trade on the basis
of, such material, non-public information, provided that the Purchaser shall remain subject to applicable law. To the extent that
any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public information regarding
the Company or any Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report
on Form 8-K. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting
transactions in securities of the Company.

 

4.7 Use
of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes
and shall not use such proceeds: (a) for the satisfaction of any portion of the Company’s debt (other than payment of trade
payables in the ordinary course of the Company’s business and prior practices), (b) for the redemption of any Common Stock
or Common Stock Equivalents, (c) for the settlement of any outstanding litigation or (d) in violation of FCPA or OFAC regulations.

 

4.8 Indemnification
of Purchasers. Subject to the provisions of this Section 4.8, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of
a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser
(within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against
the Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is
not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless
such action is solely based upon a material breach of such Purchaser Party’s representations, warranties or covenants under
the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations
by such Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which is finally judicially
determined to constitute fraud, gross negligence or willful misconduct). If any action shall be brought against any Purchaser
Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company
in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable
to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate
in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the
extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed
after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable
opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser
Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel.
The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected
without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent,
but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of
the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction
Documents. The indemnification required by this Section 4.8 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein
shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities
the Company may be subject to pursuant to law.

 

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4.9 Reservation
of Common Stock. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available
at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company
to issue Shares pursuant to this Agreement.

 

4.10 Listing
of Common Stock. The Company hereby agrees to use best efforts to maintain the listing or quotation of the Common Stock on
the Trading Market on which it is currently listed, and concurrently with the Closing, the Company shall apply to list or quote
all of the Shares on such Trading Market and promptly secure the listing of all of the Shares on such Trading Market. The Company
further agrees, if the Company applies to have the Common Stock traded on any other Trading Market, it will then include in such
application all of the Shares and will take such other action as is necessary to cause all of the Shares to be listed or quoted
on such other Trading Market as promptly as possible. The Company will then take all action reasonably necessary to continue the
listing and trading of its Common Stock on a Trading Market and will comply in all respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the Trading Market. The Company agrees to maintain the eligibility of
the Common Stock for electronic transfer through the Depository Trust Company or another established clearing corporation, including,
without limitation, by timely payment of fees to the Depository Trust Company or such other established clearing corporation in
connection with such electronic transfer.

 

4.11 Subsequent
Equity Sales. From the date hereof until the earlier of (i) 60 days after the Closing Date or (ii) the Trading Day following
the date that the Common Stock’s closing price exceeds $6.50 (subject to adjustment for forward and reverse stock splits
and the like) for a period of 10 consecutive Trading Days, neither the Company nor any Subsidiary shall issue, enter into any
agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents or
file any registration statements, including any amendments or supplements to any registration statement, other than the Prospectus
Supplement required pursuant to this Agreement (including but not limited to any for exchanges of existing securities of the Company
and any issuances pursuant to existing securities that are amended after the date hereof). Notwithstanding the foregoing, this
Section 4.11 shall not apply in respect of an Exempt Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance.
From the date hereof until the two year anniversary of the Closing Date, the Company shall be prohibited from effecting or entering
into an agreement to effect any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents
(or a combination of units thereof) involving a Variable Rate Transaction. “Variable Rate Transaction” means a transaction
in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable
for, or include the right to receive additional shares of Common Stock either (A) at a conversion price, exercise price or exchange
rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at
any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that
is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence
of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock
or (ii) enters into, or effects a transaction under, any agreement, including, but not limited to, an equity line of credit, whereby
the Company may issue securities at a future determined price. Any Purchaser shall be entitled to obtain injunctive relief against
the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages.

 

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4.12 Equal
Treatment of Purchasers. No consideration (including any modification of any Transaction Document) shall be offered or paid
to any Person to amend or consent to a waiver or modification of any provision of the Transaction Documents unless the same consideration
is also offered to all of the parties to the Transaction Documents. For clarification purposes, this provision constitutes a separate
right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to
treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect
to the purchase, disposition or voting of Securities or otherwise.

 

4.13 Certain
Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither
it nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including
Short Sales of any of the Company’s securities during the period commencing with the execution of this Agreement and ending
at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release
as described in Section 4.4.  Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such
time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release
as described in Section 4.4, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and
the information included in the Disclosure Schedules.  Notwithstanding the foregoing and notwithstanding anything contained
in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation,
warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time
that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described
in Section 4.4, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company
in accordance with applicable securities laws from and after the time that the transactions contemplated by this Agreement are
first publicly announced pursuant to the initial press release as described in Section 4.4 and (iii) no Purchaser shall have any
duty of confidentiality or duty not to trade in the securities of the Company to the Company or its Subsidiaries after the issuance
of the initial press release as described in Section 4.4.  Notwithstanding the foregoing, in the case of a Purchaser that
is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets
and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other
portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.

 

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4.14 Capital
Changes. Until the one year anniversary of the Closing Date, the Company shall not undertake a reverse or forward stock split
or reclassification of the Common Stock without the prior written consent of the Purchasers holding a majority in interest of
the Shares.

 

4.15 
Participation Right.

 

At
any time on or prior to the two year anniversary of the Closing Date, neither the Company nor any of its Subsidiaries shall, directly
or indirectly, issue, offer, sell, grant any option or right to purchase, or otherwise dispose of (or announce any issuance, offer,
sale, grant of any option or right to purchase or other disposition of) any equity security or any equity-linked or related security
(including, without limitation, any “equity security” (as that term is defined under Rule 405 promulgated under the
1933 Act), any Common Stock Equivalents, any preferred stock or any purchase rights) (any such issuance, offer, sale, grant, disposition
or announcement (whether pursuant to a public or private offering) is referred to as a “Subsequent Placement”)
unless the Company shall have first complied with this Section 4.15. The Company shall provide notice to each Purchaser at
least (i) 6 hours in advance of an intra-day Subsequent Placement pursuant to a registration statement, (ii) 18 hours in advance
of an overnight Subsequent Placement pursuant to a registration statement, and (ii) 3 Business Days in advance of any other Subsequent
Placement (the notice period referred to in (i), (ii) and (iii) is referred to as the “Applicable Placement Notice Time”).
The Company acknowledges and agrees that the right set forth in this Section 4.15 is a right granted by the Company, separately,
to each Purchaser.

 

(i) No
later than the Applicable Placement Notice Time prior to any proposed or intended Subsequent Placement, the Company shall deliver
to each Purchaser an irrevocable written notice (the “Offer Notice”) of any proposed or intended issuance or
sale or exchange (the “Offer”) of the securities being offered (the “Offered Securities”)
in a Subsequent Placement, which Offer Notice shall (A) identify and describe the Offered Securities, (B) describe the price and
other material terms upon which they are to be issued, sold or exchanged, and the number or amount of the Offered Securities to
be issued, sold or exchanged, (C) include proposed drafts of the Subsequent Placement Documents (as defined below) and specify
the proposed time at which the Company intends to execute the Subsequent Placement Documents, and (D) offer to issue and sell
to or exchange with such Purchaser in accordance with the terms of the Offer such Purchaser’s pro rata portion of thirty-five
percent (35%) of the Offered Securities, provided that the number of Offered Securities which such Purchaser shall have the right
to subscribe for under this Section 4.15 shall be (x) based on such Purchaser’s pro rata portion of the aggregate Subscription
Amount for all Purchasers pursuant to this Agreement (the “Basic Amount”), and (y) with respect to each Purchaser
that elects to purchase its Basic Amount, any additional portion of the Offered Securities attributable to the Basic Amounts of
other Purchasers as such Purchaser shall indicate it will purchase or acquire should the other Purchasers subscribe for less than
their Basic Amounts (the “Undersubscription Amount”), which process shall be repeated until each Purchaser
shall have an opportunity to subscribe for any remaining Undersubscription Amount.

 

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(ii) To
accept an Offer, in whole or in part, such Purchaser must deliver a written notice to the Company following receipt of an Offer
Notice at least, as applicable, (i) 1 hour in advance of an intra-day Subsequent Placement pursuant to a registration statement,
(ii) 3 hours in advance of an overnight Subsequent Placement pursuant to a registration statement, and (ii) 1 Business Day in
advance of any other Subsequent Placement (as applicable, the “Offer Period”), setting forth the portion of
such Purchaser’s Basic Amount that such Purchaser elects to purchase and, if such Purchaser shall elect to purchase all
of its Basic Amount, the Undersubscription Amount, if any, that such Purchaser elects to purchase (in either case, the “Notice
of Acceptance”). If the Basic Amounts subscribed for by all Purchasers are less than the total of all of the Basic Amounts,
then each Purchaser who has set forth an Undersubscription Amount in its Notice of Acceptance shall be entitled to purchase, in
addition to the Basic Amounts subscribed for, the Undersubscription Amount it has subscribed for; provided, however, if the Undersubscription
Amounts subscribed for exceed the difference between the total of all the Basic Amounts and the Basic Amounts subscribed for (the
“Available Undersubscription Amount”), each Purchaser who has subscribed for any Undersubscription Amount shall
be entitled to purchase only that portion of the Available Undersubscription Amount as the Basic Amount of such Purchaser bears
to the total Basic Amounts of all Purchasers that have subscribed for Undersubscription Amounts, subject to rounding by the Company
to the extent it deems reasonably necessary. Notwithstanding the foregoing, if the Company desires to modify or amend the terms
and conditions of the Offer prior to the expiration of the Offer Period, the Company may deliver to each Purchaser a new Offer
Notice and the Offer Period shall expire one (1) Trading Day after such Purchaser’s receipt of such new Offer Notice.

 

(iii) The
Company shall have forty-eight (48) hours from the expiration of the Offer Period above (A) to offer, issue, sell or exchange
all or any part of such Offered Securities as to which a Notice of Acceptance has not been given by a Purchaser (the “Refused
Securities”) pursuant to a definitive agreement(s) (the “Subsequent Placement Agreement”), but only
upon terms and conditions (including, without limitation, unit prices and interest rates) that are not more favorable to the acquiring
Person or Persons or less favorable to the Company than those set forth in the Offer Notice and (B) to publicly announce (x) the
execution of such Subsequent Placement Agreement, and (y) either (I) the consummation of the transactions contemplated by such
Subsequent Placement Agreement or (II) the termination of such Subsequent Placement Agreement, which shall be filed with the SEC
on a Current Report on Form 8-K with such Subsequent Placement Agreement and any documents contemplated therein filed as exhibits
thereto.

 

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(iv) In
the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on the
terms specified in Section 4.15(iii) above), then each Purchaser may, at its sole option and in its sole discretion, withdraw
its Notice of Acceptance or reduce the number or amount of the Offered Securities specified in its Notice of Acceptance to an
amount that shall be not less than the number or amount of the Offered Securities that such Purchaser elected to purchase pursuant
to Section 4.15(ii) above multiplied by a fraction, (i) the numerator of which shall be the number or amount of Offered Securities
the Company actually proposes to issue, sell or exchange (including Offered Securities to be issued or sold to Purchasers pursuant
to this Section 4.15 prior to such reduction) and (ii) the denominator of which shall be the original amount of the Offered
Securities. In the event that any Purchaser so elects to reduce the number or amount of Offered Securities specified in its Notice
of Acceptance, the Company may not issue, sell or exchange more than the reduced number or amount of the Offered Securities unless
and until such securities have again been offered to the Purchasers in accordance with Section 4.15(i) above.

 

(v) Upon
the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, such Purchaser shall acquire
from the Company, and the Company shall issue to such Purchaser, the number or amount of Offered Securities specified in its Notice
of Acceptance, as reduced pursuant to Section 4.15(iv) above if such Purchaser has so elected, upon the terms and conditions
specified in the Offer. The purchase by such Purchaser of any Offered Securities is subject in all cases to the preparation, execution
and delivery by the Company and such Purchaser of a separate purchase agreement relating to such Offered Securities reasonably
satisfactory in form and substance to such Purchaser and its counsel.

 

(vi) Any
Offered Securities not acquired by a Purchaser or other Persons in accordance with this Section 4.15 may not be issued, sold
or exchanged until they are again offered to such Purchaser under the procedures specified in this Agreement.

 

(vii) The
Company and each Purchaser agree that if any Purchaser elects to participate in the Offer, neither the Subsequent Placement Agreement
with respect to such Offer nor any other transaction documents related thereto (collectively, the “Subsequent Placement
Documents”) shall include any term or provision whereby such Purchaser shall be required to agree to any restrictions
on trading as to any securities of the Company or be required to consent to any amendment to or termination of, or grant any waiver,
release or the like under or in connection with, any agreement previously entered into with the Company or any instrument received
from the Company.

 

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(viii) Notwithstanding
anything to the contrary in this Section 4.15 and unless otherwise agreed to by such Purchaser, the Company shall either confirm
in writing to such Purchaser that the transaction with respect to the Subsequent Placement has been abandoned or shall publicly
disclose its intention to issue the Offered Securities, in either case, in such a manner such that such Purchaser will not be
in possession of any material, non-public information, by the forty-eighth (48th) hour following delivery of the Offer
Notice. If by such forty-eight (48th) hour, no public disclosure regarding a transaction with respect to the Offered
Securities has been made, and no notice regarding the abandonment of such transaction has been received by such Purchaser, such
transaction shall be deemed to have been abandoned and such Purchaser shall not be in possession of any material, non-public information
with respect to the Company or any of its Subsidiaries. Should the Company decide to pursue such transaction with respect to the
Offered Securities, the Company shall provide such Purchaser with another Offer Notice and such Purchaser will again have the
right of participation set forth in this Section 4.15.

 

(ix) The
restrictions contained in this Section 4.15 shall not apply in connection with any Exempt Issuance (as defined in this Agreement).

 

ARTICLE
V.

MISCELLANEOUS

 

5.1 Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing
has not been consummated on or before the fifth (5th) Trading Day following the date hereof; provided, however,
that no such termination will affect the right of any party to sue for any breach by any other party (or parties).

 

5.2 Fees
and Expenses. At the Closing, the Company has agreed to pay the legal fees of Foley in an amount equal to $15,000. Except
as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees (including, without limitation,
any fees required for same-day processing of any instruction letter delivered by the Company and any exercise notice delivered
by a Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.

 

5.3 Entire
Agreement. The Transaction Documents, together with the exhibits and schedules thereto, the Prospectus and the Prospectus
Supplement, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede
all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been
merged into such documents, exhibits and schedules.

 

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5.4 Notices.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and
shall be deemed given and effective on the earliest of: (a) the time of transmission, if such notice or communication is delivered
via facsimile at the facsimile number or email attachment at the email address as set forth on the signature pages attached hereto
at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number or email attachment at the email address as set forth
on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any
Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for
such notices and communications shall be as set forth on the signature pages attached hereto. To the extent that any notice provided
pursuant to any Transaction Document constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries,
the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.

 

5.5 Amendments;
Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Company and Purchasers which purchased (or, prior to the Closing Date, agreed to purchase)
at least 50.1% in interest of the Shares based on the initial Subscription Amounts hereunder or, in the case of a waiver, by the
party against whom enforcement of any such waived provision is sought, provided that if any amendment, modification or waiver
disproportionately and adversely impacts a Purchaser (or group of Purchasers), the consent of such disproportionately impacted
Purchaser (or group of Purchasers) shall also be required. No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or
a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such right. Any proposed amendment or waiver that disproportionately,
materially and adversely affects the rights and obligations of any Purchaser relative to the comparable rights and obligations
of the other Purchasers shall require the prior written consent of such adversely affected Purchaser. Any amendment effected in
accordance with this Section 5.5 shall be binding upon each Purchaser and holder of Securities and the Company.

 

5.6 Headings.
The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

 

5.7 Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of
each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to
whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”

 

5.8 No
Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as
otherwise set forth in Section 4.8 and this Section 5.8.

 

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5.9 Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all legal Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication
of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including
with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Action or Proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such Action
or Proceeding is improper or is an inconvenient venue for such Proceeding. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such Action or Proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If any party shall commence
an Action or Proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company
under Section 4.8, the prevailing party in such Action or Proceeding shall be reimbursed by the non-prevailing party for its reasonable
attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Action
or Proceeding.

 

5.10 Survival.
The representations and warranties contained herein shall survive the Closing and the delivery of the Securities.

 

5.11 Execution.
This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of
the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.

 

5.12 Severability.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain
in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

 

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5.13 Rescission
and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of)
any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser
may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand
or election in whole or in part without prejudice to its future actions and rights.

 

5.14 Replacement
of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation),
or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory
to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances
shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement
Securities.

 

5.15 Remedies.
In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of
the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert in any Action for specific performance of any such obligation
the defense that a remedy at law would be adequate.

 

5.16 Payment
Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document
or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from,
disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

5.17 Independent
Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several
and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance
or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any
other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers
are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction
Documents. Each Purchaser shall be entitled to independently protect and enforce its rights including, without limitation, the
rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser
to be joined as an additional party in any Proceeding for such purpose. Each Purchaser has been represented by its own separate
legal counsel in its review and negotiation of the Transaction Documents. For reasons of administrative convenience only, each
Purchaser and its respective counsel have chosen to communicate with the Company through Foley. Foley does not represent any of
the Purchasers and only represents Chardan Capital Markets LLC. The Company has elected to provide all Purchasers with the same
terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any
of the Purchasers. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction
Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between
and among the Purchasers.

 

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5.18 Liquidated
Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction
Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages
or other amounts are due and payable shall have been canceled.

 

5.19Saturdays,
Sundays, Holidays, etc.If the last or appointed day for the taking of any action or the expiration of any right required
or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding
Business Day.

 

5.20 Construction.
The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and
every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.

 

5.21 WAIVER
OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE
PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY. 

 

(Signature
Pages Follow)

 

    33

     

    

 

IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

 

	Arcimoto,
                                         Inc.

         
	 	Address
    for Notice:
	By: 	               	 	[  ]
	 	[  ],
    [  ]	 	[  ]
	

 

With
a copy to (which shall not constitute notice):

	 	

        

        E-Mail:
        [  ]

        Fax:
        [(   )       -       ]

 

 

 

 

 

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

 

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PURCHASER
SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT

 

IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

 

Name
of Purchaser: ________________________________________________________

 

Signature
of Authorized Signatory of Purchaser: _________________________________

 

Name
of Authorized Signatory: _______________________________________________

 

Title
of Authorized Signatory: ________________________________________________

 

Email
Address of Authorized Signatory:_________________________________________

 

Facsimile
Number of Authorized Signatory: __________________________________________

 

Address
for Notice to Purchaser:

 

 

 

Address
for Delivery of Securities to Purchaser (if not same as address for notice):

 

 

 

Subscription
Amount: $_________________

 

Shares:
_________________

 

EIN
Number: _______________________

 

[SIGNATURE
PAGES CONTINUE]

 

    35

     

    

 

EXHIBIT
A

Form
of Company Counsel Legal Opinion

 

		1.	The
                                         Company is a corporation duly organized, validly existing and in good standing under
                                         the laws of Oregon. The Company has all requisite power and authority, and all material
                                         governmental licenses, authorizations, consents and approvals, that are required to own
                                         and operate its properties and assets and to carry on its business as now conducted and
                                         as proposed to be conducted (all as described in the Company’s Annual Report on
                                         Form 10-K for its fiscal year ended December 31, 2017). The Company is duly qualified
                                         to transact business and is in good standing in each jurisdiction in which the failure
                                         to qualify could have a Material Adverse Effect on the Company.

 

		2.	The
                                         Company has all requisite power and authority (i) to execute, deliver and perform the
                                         Transaction Documents, (ii) to issue, sell and deliver the Shares pursuant to the Transaction
                                         Documents and (iii) to carry out and perform its obligations under, and to consummate
                                         the transactions contemplated by, the Transaction Documents.

 

		3.	All
                                         action on the part of the Company, its directors and its stockholders necessary for the
                                         authorization, execution and delivery by the Company of the Transaction Documents, the
                                         authorization, issuance, sale and delivery of the Shares pursuant to the Agreement and
                                         the consummation by the Company of the transactions contemplated by the Transaction Documents
                                         has been duly taken. The Transaction Documents have been duly and validly executed and
                                         delivered by the Company and constitute the legal, valid and binding obligation of the
                                         Company, enforceable against the Company in accordance with their terms, except that
                                         (a) such enforceability may be limited by bankruptcy, insolvency or other similar laws
                                         affecting the enforcement of creditors’ rights in general and (b) the remedies
                                         of specific performance and injunctive and other forms of injunctive relief may be subject
                                         to equitable defenses.

 

		4.	The
                                         Shares which are being issued on the date hereof pursuant to the Agreement have been
                                         duly authorized and validly issued and are fully paid and nonassessable are free of preemptive
                                         or similar rights, and have been issued in compliance with applicable securities laws,
                                         rules and regulations. The Company’s authorized, issued and outstanding capital
                                         stock is as set forth in the Agreement and the SEC Reports. The Securities conform in
                                         all material respects to the descriptions thereof contained in the SEC Reports and the
                                         Agreement. The form of certificate used to evidence the Shares comply in all material
                                         respects with all applicable statutory requirements and with any applicable requirements
                                         of the Certificate of Incorporation, as amended, or Bylaws of the Company. To our knowledge,
                                         except for rights described in the SEC Reports, there are no other options, warrants,
                                         conversion privileges or other rights presently outstanding to purchase or otherwise
                                         acquire from the Company any capital stock or other securities of the Company, or any
                                         other agreements to issue any such securities or rights. The rights, privileges and preferences
                                         of the Common Stock are as stated in the Company’s Certificate of Incorporation.

 

    36

     

    

 

		5.	The
                                         Company meets the eligibility requirements for the use of Form S-3 for the registration
                                         of the Shares. The transactions contemplated by the Purchase Agreement and the sale of
                                         the Securities meet the requirements for, and comply with the conditions for the use
                                         of, Form S-3 under the Securities Act. The Registration Statement and the Prospectus
                                         comply as to form in all material respects with the requirements of the Securities Act.

 

		6.	To
                                         our knowledge, the Company has filed all reports (the “SEC Reports”) required
                                         to be filed by it under Sections 13(a) and 15(d) of the Securities Exchange Act of 1934,
                                         as amended (the “Exchange Act”). As of their respective filing dates, the
                                         SEC Reports complied in all material respects as to form with the requirements of the
                                         Exchange Act and the rules and regulations of the Commission promulgated thereunder.

 

		7.	To
                                         our knowledge, there are no contracts, agreements or instruments (collectively, "Contracts")
                                         required to be described or referred to in the Registration Statement or the Prospectus
                                         or in any report filed by the Company with the Commission and incorporated by reference
                                         into the Registration Statement or required to be filed as exhibits to the Registration
                                         Statement or in any report filed by the Company with the Commission and incorporated
                                         by reference into the Registration Statement, other than those described or referred
                                         to therein or filed or incorporated by reference as exhibits thereto.

 

		8.	To
                                         our knowledge, except as set forth in the SEC Reports, there is no claim, action, suit,
                                         proceeding, arbitration, investigation or inquiry, pending or threaten, before any court
                                         or governmental or administrative body or agency, or any private arbitration tribunal,
                                         against the Company or its Subsidiaries, or any of the officers, directors or employees
                                         (in connection with discharge of their duties as officer, directors and employees), of
                                         the Company or its Subsidiaries, or affecting any of its properties or assets.

 

		9.	In
                                         connection with the valid execution, delivery and performance by the Company of Transaction
                                         Documents, or the offer, sale, issuance or delivery of the Shares or the consummation
                                         of the transactions contemplated thereby, no consent, license, permit, waiver, approval
                                         or authorization of, or designation, declaration, registration or filing with, any court,
                                         governmental or regulatory authority, or self-regulatory organization, is required.

 

		10.	The
                                         statement in the Prospectus under the heading "Description of Common Stock"
                                         fairly and accurately summarize the matters referred to therein in all material respects.

 

		11.	The
                                         Company is not and, after giving effect to the offering and sale of the Securities and
                                         the application of the proceeds thereof as described in the Registration Statement and
                                         the Prospectus, will not be an "investment company," as such term is defined
                                         in the Investment Company Act of 1940, as amended.

 

		12.	The
                                         Registration Statement was declared effective by the Commission on October 17, 2018.
                                         No stop order suspending the effectiveness of the Registration Statement has been issued
                                         by the Commission and to our knowledge, no proceeding for that purpose has been instituted
                                         by the Commission. The Prospectus was filed with the Commission pursuant to Rule 424(b)
                                         under the Securities Act in the manner and within the time period required by such Rule
                                         424(b).

 

 

37

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