Document:

Draft Term Sheet: Equity Financing Mechanism

 

Set forth below is an outline of the proposed mechanism
pursuant to which WISeKey International Holding Ltd or one of its affiliates (WISeKey) would commit to equity financing for arago
GmbH (arago.)

 

Whereas WISeKey has already provided to arago an amount
of CHF 5 million by the means of an executed convertible loan fully paid by WISeKey in March 2021 against a fully diluted ownership of
51% in arago,

 

Whereas arago has informed WISeKey that they would need further
financing due to the reduction of the projected revenue for 2021 from the initially budgeted revenue of EUR 11 million (approximately
equivalent to CHF12,2 million);

 

Whereas arago has requested WISeKey to provide the financing
for the projected cash requirements of arago in 2021 which amounts to EUR 7,5 million (approximately equivalent to CHF8,3 million) by
means of a new convertible loan;

 

Both parties have agreed on the following:

 

		1.	WISeKey will commit to provide additional equity financing to arago at WISeKey`s discretion for an amount
of up to CHF 8.5 million (the Equity Financing), to address the cash requirements of arago. The Equity Financing is provided on
the understanding that, in case of an increase of arago`s 2021 revenue, WISeKey will adapt the Equity Financing accordingly to arago`s
cash requirements during 2021

 

		2.	The Equity Financing will be provided by way of a contribution by WISeKey of cash to arago’s free
capital reserves pursuant to section 272 para. (2) no. 4 of the German Commercial Code (HGB), or such other mechanism as WISeKey
considers appropriate.

 

		3.	As consideration for providing the Equity Financing, arago's remaining shareholders, being Hans-Christian
Boos, either individually or through his companies, including Ogara GmbH and Aquilon GmbH, will agree that the number of WISeKey's common
shares, par value CHF 0.05 each (the Class B Shares), to be issued to Hans-Christian Boos in exchange of his 49% equity interest
in arago (currently set at 12,327,506 WISeKey Class B Shares) sold to WISeKey upon exercise of the put option (the Put Option)
granted to them by WISeKey pursuant to the Term Sheet by and among WISeKey and the other shareholders of arago, dated as of 2 November
2020, will be reduced as follows:

 

		–	Hans-Christian Boos’ right to receive WISeKey Class
B Shares upon exercise of the Put Option at the end of the funding period (initially defined as 31 December 2021) will be reduced by
such number of WISeKey Class B Shares as corresponds to the quotient of (1) the Equity Financing amount due to WISeKey, converted into
Swiss francs, divided by (2) the Conversion Price. The Conversion Price shall be the closing share price of one WISeKey Class
B Share as quoted on the SIX Swiss Exchange on the last trading day of the funding period (initially defined as 30 December 2021), rounded
down to the next integral number.

 

    
 

     

    

 

		4.	In case arago’s situation improves and it has generated sufficient cash reserves from its operating
activities to fund its activity over the next 12 months, arago may repay the loan, in part or in full, out of these cash reserves. Prior
to repaying the loan, arago’s management shall provide a detailed profit and loss and cash forecast demonstrating its capacity to
fund its future activities out of free cash reserves in addition to the proposed loan repayment. The forecast is subject to the approval
of WISeKey’s management before any repayment can be made.

 

		5.	Should arago or Hans-Christian Boos, either individually or through any of his companies, repay the
loan, either in part or in full, then WISeKey will commit to reestablish authorized or similar share capital in the amount necessary to
satisfy its then current obligations under the Put Option in due course in connection with its continuation to the British Virgin Islands,
but in any event no later than in connection with its contemplated public share offering in the US capital market.

 

		6.	The restructuring and re-hiring plan attached hereto as Annex 1 (the Restructuring and Re-Hiring Plan)
and all measures contained therein are hereby agreed between the parties and may be implemented and executed by the management of arago
without further approval from any of the arago shareholder. WISeKey and HCB shall take all steps necessary and pass any shareholder resolution
required to enable arago’s management to implement and execute the Restructuring and Re-Hiring Plan.

 

		7.	WISeKey enters into this term sheet based on the understanding that Hans-Christian Boos, either individually
or through any of his companies, including Ogara GmbH and Acquilon GmbH, does not have any contractual arrangement or legal agreement
with KKR that would restrict his ability to execute upon this equity financing mechanism.

 

		8.	The revolving loan facility and all related documentation will be governed by Swiss law.

 

		9.	This term sheet and any
dispute or claim arising out of or in connection with it or its subject matter (including non-contractual disputes or claims) shall be
governed by and construed in accordance with Swiss law.

 

	 	/s/ Hans-Christian Boos	 	 
	 	Name:	Hans-Christian Boos	 	 
	 	Date:	02.04.2021	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	/s/ Carlos Moreira	 	 
	 	Name:	Carlos Moreira	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	/s/ Peter Ward	 	 
	 	Name:	Peter Ward	 	 

 

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Annex
1: Restructuring and Re-Hiring Plan

 

 

 

 

 

 

 

 

 

 

3/3EXECUTION VERSION

 

Amendment Agreement to Draft Term Sheet: Equity
Financing Mechanism (Agreement)

 

Whereas WISeKey International Holding Ltd (WISeKey) and arago
GmbH (arago) (WISeKey and arago each a Party and together the Parties) have entered into an Equity Financing Mechanism
Agreement (the Financing Agreement) dated 02 April 2021 pursuant to which the Parties have agreed on the mechanism and terms for
WISeKey to provide equity financing to arago;

 

Whereas WISeKey has so far provided to arago an amount of 1,232,704.32
Euro for the purposes of repaying the Harbert loan and 1,111,214.03 Euro for arago’s operational funding requirements (the Existing
Equity Funding) under the Equity Financing Agreement;

 

Whereas Hans-Christian Boos through Aquilon Invest GmbH and OGARA GmbH
(together the Affiliates) has the right to sell to WISeKey its remaining stake in arago currently amounting to ~49% of arago’s
entire share capital (the HCB Stake) in exchange of 12,327,506 WISeKey class B shares (the Put Option).

 

The Parties have agreed on an additional equity financing to arago
up to a total amount of 7,500,000 Euro and therefore wish to amend the Financing Agreement as follows:

 

		1.	WISeKey shall facilitate additional equity financing for an additional amount of up to 5,200,000 Euro (the Future Equity Financing),
to address the cash requirements and debts of arago by way of a convertible loan (as further specified below).

 

		2.	The Future Equity Financing will be provided (i) as a lump sum payment in the amount of 1,000,000 Euro upon signing of this Agreement
to clear the historic backlog of unpaid invoices, personnel costs, severance charges, social charges and similar expenses (as set out
in Annex 1), (ii) additional payments in the sum of 500,000 Euro to clear the balance of the historic backlog of unpaid invoices, personnel
costs, severance chargers, social charges and similar expenses (as set out in Annex 1) to be made as and when these items are both confirmed
and fall-due and (iii) monthly instalments on the 1st trading day of the month in the amount of (A) 308,176.08 Euro for the purpose of
repaying the Harbert loan (the Debt Costs) and (B) 330,000 Euro for operational funding requirements based upon the forecast presented
by arago on the 7th July 2021 (as set out in Annex 2, Slide 4) (Operational Costs).

 

		3.	The amounts paid as Debt Costs and Operational Costs may be reduced by arago at any time if not required by arago, whereby any reduced
Operational Costs can be carried forward to the future months.

 

		4.	All payments made to third parties by arago using the funds, regardless of the amount, provided as part of this Agreement will still
require approval by WISeKey’s CFO or CEO.

 

		5.	The Hiring Investments and Replacement Hires attached hereto as Annex 3 (ref: Slide 21, Agreed to Hiring Investments and Replacement
Hires) will be implemented and executed by the management of arago without further approval from any of the arago shareholder, provided
that the following conditions are met: (i) the monthly operational funding requirements of arago will not exceed 330,000 Euro and (ii)
all new hires will be subject to a six-month probation period.

 

     

     

    

 

		6.	Subject to the terms and conditions set forth in this Agreement, WISeKey as lender hereby grants to arago as borrower a convertible
loan in an aggregate amount of the sum of the Existing Equity Funding and the Future Equity Funding (together the Equity Funding)
(the Convertible Loan). Whereby the Existing Equity Funding has already been paid out, and the outstanding amount of the Convertible
Loan will be paid out and shall become due and payable according to section 2.

 

		7.	The Convertible Loan shall have a term of 31 December 2021 (the Term). arago (or any of its shareholders or affiliates) shall
have the right to repay any outstanding amount under the Convertible Loan prior to the end of the Term. Any outstanding amount under the
Convertible Loan after the end of the Term (such amount the Conversion Amount) may, at the discretion of WISeKey, be converted
in accordance with section 8 at any time.

 

		8.	The Conversion Amount may be converted into WISeKey class B shares and deducted from the right under the Put Option and the HCB Stake
reduced accordingly to match the reduced Put Option, subject to and in accordance with the following provisions (the Conversion):

 

		a.	The Put Option may be reduced by such number of WISeKey class B shares as corresponds to the quotient of (i) the Conversion Amount,
converted into Swiss francs, divided by (ii) the Conversion Price. The Conversion Price shall be the VWAP of one WISeKey class
B share as quoted on the SIX Swiss Exchange during the twenty (20) consecutive SIX Swiss Exchange trading days until (and including) 30
December 2021, rounded down to the next integral number (such amount of shares the Reduction Shares);

 

		b.	Hans-Christian Boos himself or through the Affiliates will transfer to WISeKey the portion of the HCB Stake corresponding to the amount
of Reduction Shares, whereby the conversion rate shall correspond to the quotient of (i) the amount of 12,327,506 WISeKey class B shares,
divided by (ii) the amount of arago shares comprising the HCB Stake. Such quotient shall represent the amount of WISeKey class B shares
equivalent to one (1) arago share (the Conversion Rate).

 

		9.	The Parties agree that Hans-Christian Boos shall explore possibilities to enter into term sheet negotiations with interested parties
with the intention to secure an alternative investment for arago or to sell arago prior to the end of the Term.

 

		10.	In case no promising term sheet for an investment or sale opportunity has been presented to WISeKey until 30 November 2021, WISeKey
shall have the right to start reducing the funding provided for any future Operational Costs set out in section 2, to the extend this
does not lead to an insolvency of arago.

 

     

     

    

 

EXECUTION VERSION

 

Signature page

 

Amendment Agreement

 

	
    WISEKEY INTERNATIONAL HOLDING AG

     

    /s/ Carlos Moreira
	 	
    /s/ Peter Ward

	
    Name: Carlos Moreira

    Title:  CEO

    Date:  27.07.2021

     
	 	
    Name: Peter Ward

    Title:  CFO

    Date:   27.07.2021

     

	
    ARAGO GMBH

     

    /s/ Peter Ward
	 	
    /s/ Hans-Christian Boos

	
    Name: Peter Ward

    Title:  Prokurist

    Date:  27.07.2021

     
	 	
    Name: Hans-Christian Boos

    Title:  Managing Director

    Date:  28.07.2021

     

	
    HANS-CHRISTIAN BOOS

     

    /s/ Hans-Christian Boos
	 	 
	
    Name: Hans-Christian Boos

    Date:   28.07.2021
	 	 

 

     

     

    

 

Annex 1

 

Historic Backlog

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