Document:

Exhibit

Exhibit 10.1

TENTH AMENDMENT TO CREDIT AGREEMENT,
FIRST AMENDMENT TO SECURITY AGREEMENT,
AND 
FIRST AMENDMENT TO GUARANTY

This TENTH AMENDMENT TO CREDIT AGREEMENT, FIRST AMENDMENT TO SECURITY AGREEMENT, AND FIRST AMENDMENT TO GUARANTY (this “Amendment”), dated as of September 23, 2016, is entered into by and among THE DIXIE GROUP, INC., a Tennessee corporation (“Dixie”), CANDLEWICK YARNS, LLC, an Alabama limited liability company (“Candlewick”), FABRICA INTERNATIONAL, INC., a California corporation (“Fabrica”), TDG OPERATIONS, LLC, a Georgia limited liability company, formerly known as Masland Carpets, LLC (“TDG”; together with Dixie, Candlewick and Fabrica, are referred to hereinafter each individually as a “Borrower”, and individually and collectively, jointly and severally, as the “Borrowers”), the persons identified as the Lenders on the signature pages hereto (the “Lenders”), and WELLS FARGO CAPITAL FINANCE, LLC, a Delaware limited liability company, as administrative agent for the Lenders (in such capacity, together with its successors and assigns in such capacity, “Agent”).

W I T N E S S E T H:

WHEREAS, pursuant to the Credit Agreement dated as of September 13, 2011, as amended by the First Amendment to Credit Agreement dated as of November 2, 2012, the Second Amendment to Credit Agreement dated as of April 1, 2013, the Third Amendment to Credit Agreement dated as of May 22, 2013, the Fourth Amendment to Credit Agreement dated as of July 1, 2013, the Fifth Amendment to Credit Agreement dated as of July 30, 2013, the Sixth Amendment to Credit Agreement dated as of August 30, 2013, the Seventh Amendment to Credit Agreement dated as of January 20, 2014, the Eighth Amendment to Credit Agreement dated as of March 14, 2014, the Ninth Amendment to Credit Agreement dated as of March 26, 2014, (as amended hereby and as the same may be further amended, modified, supplemented, renewed, restated or replaced, the “Credit Agreement”), among Agent, the Lenders and the Borrowers, the Lenders have made loans and advances and provided other financial accommodations to the Borrowers; 

WHEREAS, Borrowers, C-Knit Apparel, Inc. (“Guarantor”), and Agent are parties to that certain Security Agreement dated as of September 13, 2011 (as amended, restated, supplemented, or otherwise modified from time to time, the “Security Agreement”); 

WHEREAS, Guarantor executed that certain General Continuing Guaranty dated as of September 13, 2011 (as amended, restated, supplemented, or otherwise modified from time to time, the “Guaranty”), in favor of Agent; and

WHEREAS, the Borrowers have requested that Agent and Lenders enter into this Amendment to make certain changes to the Credit Agreement, the Security Agreement, and the Guaranty, and Agent and the Lenders are willing to amend the Credit Agreement, the Security Agreement, and the Guaranty subject to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the agreements herein contained and other good and valuable consideration, the parties hereby agree as follows:

		
	I.
	     DEFINITIONS AND INTERPRETATION.

1.Definitions and Interpretation
.  Unless otherwise defined herein or the context otherwise requires, terms used in this Amendment, including its preamble and recitals, have the meanings provided in the Credit Agreement. 

		
	II.
	     AMENDMENTS TO CREDIT AGREEMENT.

Subject to the satisfaction of each of the conditions precedent set forth in Section V of this Amendment, the Credit Agreement is hereby amended as follows:
1.Additional Definitions
.  As used herein, the following terms shall have the meanings given to them below, and the Credit Agreement is hereby amended to include, in addition and not in limitation, the following new definitions in appropriate alphabetical order in Schedule 1.1:
“Borrowing Base” means, as of any date of determination, the result of:
(a)85% of the amount of Eligible Accounts, less the amount, if any, of the Dilution Reserve, plus 
(b)the lesser of: (i) $130,000,000; and (ii) the sum of (A) the lesser of (1) 70% of the value (calculated on a blended basis across Inventory categories at the lower of cost or market on a basis consistent with Borrowers’ historical accounting practices) of Eligible Landed Inventory, and (2) 85% times the most recently determined Net Liquidation Percentage times the value (calculated at the lower of cost or market on a basis consistent with Borrowers’ historical accounting practices) of Borrowers’ Eligible Landed Inventory, plus (B) the lesser of (1) $2,500,000 and (2) the lesser of (y) 70% of the aggregate undrawn amount of outstanding Qualified Import Letters of Credit, and (z) 85% times the most recently determined Net Liquidation Percentage times the value (calculated at the lower of cost or market on a basis consistent with Borrowers’ historical accounting practices) of the Eligible Inventory subject to such Qualified Import Letters of Credit, plus
(c)the sum of the Fixed Asset Availability Amount and the Susan Street Real Property Availability Amount, minus
(d)the aggregate amount of reserves established by Agent under Section 2.1(c) of the Agreement;
provided, that, the applicable amounts of Eligible Accounts, Eligible Inventory, Eligible M&E and Eligible Real Property to be included in clauses (a), (b), and (c) above, and the amount of reserves under clause (d) above, shall each be calculated without duplication of deductions and reserves otherwise taken into account in the calculation of Eligible Accounts, Eligible Inventory, Eligible M&E and Eligible Real Property.

“Borrowing Base Excess” has the meaning set forth in Section 2.4(e)(i).

“Change in Law” means the occurrence after the date of the Agreement of:  (a) the adoption or effectiveness of any law, rule, regulation, judicial ruling, judgment or treaty, (b) any change in any law, rule, regulation, judicial ruling, judgment or treaty or in the administration, interpretation, implementation or application by any Governmental Authority of any law, rule, regulation, guideline or treaty, or (c) the making or issuance by any Governmental Authority of any request, rule, guideline or directive, whether or not having the force of law; provided that notwithstanding anything in the Agreement to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives concerning capital adequacy promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities shall, in each case, be deemed to be a “Change in Law,” regardless of the date enacted, adopted or issued.

“Maturity Date” has the meaning specified therefor in Section 3.3 of the Agreement.

“Tenth Amendment” means the Tenth Amendment to Credit Agreement, First Amendment to Security Agreement, and First Amendment to Guaranty dated as of September 23, 2016, by and among Borrowers, Lenders and Agent, as acknowledged and agreed to by the Guarantors.

“Tenth Amendment Effective Date” shall have the meaning given to such term in Section V of the Tenth Amendment.

2.Revised Definitions.  The Credit Agreement is hereby amended by deleting the definitions of “Advances”, “Applicable Margin”, “Application Event”, “Business Day”, “Commitment”, “Excess Availability”, “Fixed Asset Availability Amount”, “Interest Period”, “LIBOR Rate”, “Maximum Revolver Amount”, “Pro Rata Share”, “Prohibited Preferred Stock”, “Revolver Usage”, “Susan Street Real Property Availability Amount” and “Trigger Level” set forth in Schedule 1.1 to the Credit Agreement and inserting the following respective new definitions in lieu thereof:

“Advances” has the meaning specified therefor in Section 2.1(a) of the Agreement.

“Applicable Margin” means, as of any date of determination, the following margin based upon the average daily Excess Availability during the preceding calendar month:

	
				
	Level
	Average Excess Availability
	Applicable LIBOR
Margin
	Applicable Base Rate Margin

	I
	Greater than $34,500,000
	1.50%
	0.50%

	II
	Less than or equal to $34,500,000 and greater than $23,000,000
	1.75%
	0.75%

	III
	Less than or equal to $23,000,000
	2.00%
	1.00%

Notwithstanding the foregoing, if the average daily Excess Availability during the preceding calendar month is greater than $34,500,000 as of any date of determination occurring during the period from the Tenth Amendment Effective Date through and including March 31, 2017, the Applicable Margin shall be set at the margin in the row styled “Level II”.
“Application Event” means the occurrence of (a) a failure by Borrowers to repay all of the Obligations in full on the Maturity Date or any earlier date upon which the Obligations become due and payable in full, or (b) an Event of Default and the election by Agent or the Required Lenders to require that payments and proceeds of Collateral be applied pursuant to Section 2.4(b)(ii) of the Agreement.
“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks are authorized or required to close in the state of Georgia, except that, if a determination of a Business Day shall relate to a LIBOR Rate Loan, the term “Business Day” also shall exclude any day on which banks are closed for dealings in Dollar deposits in the London interbank market.
“Commitment” means, with respect to each Lender, its Commitment and, with respect to all Lenders, their Commitments, in each case as such Dollar amounts are set forth beside such Lender’s name under the applicable heading on Schedule C-1 or in the Assignment and Acceptance pursuant to which such Lender became a Lender under the Agreement, as such amounts may be reduced or increased from time to time pursuant to assignments made in accordance with the provisions of Section 13.1 of the Agreement.
“Excess Availability” means, as of any date of determination, (a) the lesser of the Maximum Revolver Amount (minus applicable reserves established by Agent under Section 2.1(c) of the Agreement, including the  1995 Bond Reserve) or the Borrowing Base, minus (b) the sum of (i) the Revolver Usage plus (ii) the aggregate amount, if any, of all trade payables (other than payables which are being disputed in good faith by a Loan Party) of the Loan Parties aged in excess of 30 days and all book overdrafts of the Loan Parties in excess of historical practices with respect thereto, in each case as determined by Agent in its Permitted Discretion.
“Fixed Asset Availability Amount” means the lesser of (a) $18,238,449.00, and (b) the sum of (i) 85% of the net orderly liquidation value of Eligible M&E set forth in an appraisal of such Eligible M&E 

conducted by an appraisal company selected by Agent, plus (ii) 75% of the fair market value (as determined on the basis of a 12-month sale period) of Borrowers’ Eligible Real Property (other than the Susan Street Real Property) set forth in an appraisal of such Eligible Real Property conducted by an appraisal company selected by Agent, as such lesser amount is reduced on a monthly basis (on the first day of each calendar month) by (A) $151,987.00, from October 1, 2016 through September 1, 2017, (B) $178,808.00, from October 1, 2017 through September 1, 2018, and (C) $217,124.00, from and after October 1, 2018.  In no event shall any increase in the appraised value of any Eligible M&E or Eligible Real Property, as set forth in any appraisal obtained after the Tenth Amendment Effective Date, be taken into account in the calculation of the Fixed Asset Availability Amount.
“Fixed Charges” means, with respect to any fiscal period and with respect to Borrowers  and their Subsidiaries, as determined on a consolidated basis in accordance with GAAP, the sum, without duplication, of (a) principal payments in respect of Indebtedness that are required to be paid during such period, together with the scheduled amortization of the Fixed Asset Availability Amount and Susan Street Real Property Availability Amount during such period, plus (b) Interest Expense accrued (other than interest paid-in-kind, amortization of financing fees, and other non-cash Interest Expense) during such period.
“Interest Period” means, with respect to each LIBOR Rate Loan, a period commencing on the date of the making of such LIBOR Rate Loan (or the continuation of a LIBOR Rate Loan or the conversion of a Base Rate Loan to a LIBOR Rate Loan) and ending 1, 2, or 3 months thereafter; provided, however, that (a) interest shall accrue at the applicable rate based upon the LIBOR Rate from and including the first day of each Interest Period to, but excluding, the day on which any Interest Period expires, (b) any Interest Period that would end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day, (c) with respect to an Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period), the Interest Period shall end on the last Business Day of the calendar month that is 1, 2, or 3 months after the date on which the Interest Period began, as applicable, and (d) Borrowers may not elect an Interest Period which will end after the Maturity Date.
“LIBOR Rate” means the rate per annum as reported on Reuters Screen LIBOR01 page (or any successor page) 2 Business Days prior to the commencement of the requested Interest Period, for a term, and in an amount, comparable to the Interest Period and the amount of the LIBOR Rate Loan requested (whether as an initial LIBOR Rate Loan or as a continuation of a LIBOR Rate Loan or as a conversion of a Base Rate Loan to a LIBOR Rate Loan) by Borrowers in accordance with the Agreement (and, if any such rate is below zero, the LIBOR Rate shall be deemed to be zero), which determination shall be made by Agent and shall be conclusive in the absence of manifest error.
“Maximum Revolver Amount” means $150,000,000, as such amount may be increased by the amount of Additional Commitment Amounts in accordance with Section 2.2 of the Agreement or decreased by the amount of reductions in the Commitments made in accordance with Section 2.4(c) of the Agreement.

“Prohibited Preferred Stock” means any Preferred Stock that by its terms is mandatorily redeemable or subject to any other payment obligation (including any obligation to pay dividends, other than dividends of shares of Preferred Stock of the same class and series payable in kind or dividends of shares of common stock) on or before a date that is less than 1 year after the Maturity Date, or, on or before the date that is less than 1 year after the Maturity Date, is redeemable at the option of the holder thereof for cash or assets or securities (other than distributions in kind of shares of Preferred Stock of the same class and series or of shares of common stock).
“Pro Rata Share” means, as of any date of determination: 
(a)    with respect to a Lender’s obligation to make Advances and right to receive payments of principal, interest, fees, costs, and expenses with respect thereto, (i) prior to the Commitments being terminated or reduced to zero, the percentage obtained by dividing (y) such Lender’s Commitment, by (z) the aggregate Commitments of all Lenders, and (ii) from and after the time that the Commitments have been terminated or 

reduced to zero, the percentage obtained by dividing (y) the outstanding principal amount of such Lender’s Advances by (z) the outstanding principal amount of all Advances,
(b)    with respect to a Lender’s obligation to participate in Letters of Credit and Reimbursement Undertakings, to reimburse the Issuing Lender, and right to receive payments of fees with respect thereto, (i) prior to the Commitments being terminated or reduced to zero, the percentage obtained by dividing (y) such Lender’s Commitment, by (z) the aggregate Commitments of all Lenders, and (ii) from and after the time that the Commitments have been terminated or reduced to zero, the percentage obtained by dividing (y) the outstanding principal amount of such Lender’s Advances by (z) the outstanding principal amount of all Advances; provided, however, that if all of the Advances have been repaid in full and Letters of Credit remain outstanding, Pro Rata Share under this clause shall be determined based upon subclause (i) of this clause as if the Commitments had not been terminated or reduced to zero and based upon the Commitments as they existed immediately prior to their termination or reduction to zero.
(c)    with respect to all other matters as to a particular Lender (including the indemnification obligations arising under Section 15.7 of the Agreement), (i) prior to the Commitments being terminated or reduced to zero, the percentage obtained by dividing (y) such Lender’s Commitment, by (z) the aggregate amount of Commitments of all Lenders, and (ii) from and after the time that the Commitments have been terminated or reduced to zero, the percentage obtained by dividing (y) the outstanding principal amount of such Lender’s Advances, by (z) the outstanding principal amount of all Advances; provided, however, that if all of the Advances have been repaid in full and Letters of Credit remain outstanding, Pro Rata Share under this clause shall be determined based upon subclause (i) of this clause as if the Commitments had not been terminated or reduced to zero and based upon the Commitments as they existed immediately prior to their termination or reduction to zero.
“Revolver Usage” means, as of any date of determination, the sum of (a) the amount of outstanding Advances, plus (b) the amount of the Letter of Credit Usage.
“Susan Street Real Property Availability Amount” means the lesser of (a) $20,250,000, and (b) 75% of the fair market value (as determined on the basis of a 12-month sale period) of Borrowers’ Susan Street Real Property set forth in an appraisal of such Eligible Real Property conducted by an appraisal company selected by Agent, as such lesser amount is reduced on a monthly basis by $112,500.00 on the first day of each calendar month from and after October 1, 2016.  In no event shall any increase in the appraised value of Borrowers’ Susan Street Real Property, as set forth in any appraisal obtained after the Tenth Amendment Effective Date, be taken into account in the calculation of the Fixed Asset Availability Amount.
“Trigger Level” means $16,500,000.

3.Elimination of Certain Definitions
.  The Credit Agreement is hereby amended by deleting the definitions of “Convertible Debentures”, “Convertible Debentures Documents”, “Convertible Debentures Indenture”, “Convertible Debentures Reserve”, “Index Rate”, “Index Rate Loan”, “Permitted Convertible Debentures Payments”, “Tranche A Advances”, “Tranche A Borrowing Base”, “Tranche A Commitment”, “Tranche A Maturity Date”, “Tranche A Maximum Revolver Amount”, “Tranche A Revolver Usage”, “Tranche B Advances”, “Tranche B Borrowing Base”, “Tranche B Commitment”, “Tranche B Maturity Date”, “Tranche B Maximum Revolver Amount”, and “Tranche B Revolver Usage” set forth in Schedule 1.1.

4.Limit on Consigned Inventory.  The Credit Agreement is hereby amended by deleting the proviso at the end of clause (l)(iii) of the definition of “Eligible Landed Inventory” set forth in Schedule 1.1 and inserting the following in lieu thereof:

provided, that, the aggregate Dollar amount included in clause (b) of the definition of  Borrowing Base based on Inventory held on consignment by third parties shall not at any time exceed $700,000, or

5.Revolver Advances.  Section 2.1 of the Credit Agreement is hereby amended so that it reads, in its entirety, as follows:

2.1    Revolver Advances.

(a)    Subject to the terms and conditions of this Agreement, and during the term of this Agreement, each Lender with a Commitment agrees (severally, not jointly or jointly and severally) to make revolving loans (“Advances”) to Borrowers in an amount at any one time outstanding not to exceed the lesser of:

(i)    such Lender’s Commitment, or

(ii)    such Lender’s Pro Rata Share of an amount equal to the lesser of:

(A)    the Maximum Revolver Amount less the sum of (1) the Letter of Credit Usage at such time, plus (2) the principal amount of Swing Loans outstanding at such time, and

(B)    the Borrowing Base at such time less the sum of (1) the Letter of Credit Usage at such time, plus (2) the principal amount of Swing Loans outstanding at such time.

(b)    Amounts borrowed pursuant to this Section 2.1 may be repaid and, subject to the terms and conditions of this Agreement, reborrowed at any time during the term of this Agreement.  The outstanding principal amount of the Advances, together with interest accrued and unpaid thereon, shall be due and payable on the Maturity Date or, if earlier, on the date on which they are declared due and payable pursuant to the terms of this Agreement.

(c)    Anything to the contrary in this Section 2.1 notwithstanding, Agent shall have the right (but not the obligation) to establish, increase, reduce, eliminate, or otherwise adjust reserves from time to time against the Borrowing Base and/or the Maximum Revolver Amount in such amounts, and with respect to such matters, as Agent in its Permitted Discretion shall deem necessary or appropriate, including (i) reserves in an amount equal to the Bank Product Reserve Amount, (ii) reserves with respect to (A) sums that any Borrower or any of its Subsidiaries is required to pay under this Agreement or any other Loan Document (such as taxes, assessments, insurance premiums, or, in the case of leased assets, rents or other amounts payable under such leases) and has failed to pay when due, and (B) amounts owing by any Borrower or any of its Subsidiaries to any Person to the extent secured by a Lien on, or trust over, any of the Collateral (other than a Permitted Lien which is a permitted purchase money Lien or the interest of a lessor under a Capital Lease), which Lien or trust, in the Permitted Discretion of Agent likely would have a priority superior to Agent’s Liens (such as Liens or trusts in favor of landlords, warehousemen, carriers, mechanics, materialmen, laborers, or suppliers, or Liens or trusts for ad valorem, excise, sales, or other taxes where given priority under applicable law) in and to such item of the Collateral, (iii) without duplication of any reduction in the Fixed Asset Availability Amount or the Susan Street Real Property Availability Amount, reserves with respect to downward adjustments (as reflected in an updated appraisal received by Agent in accordance with the terms hereof) in the appraised value of Eligible Real Property or Eligible M&E, (iv)  the Environmental Reserve, and (v) a reserve in the amount of $7,000,000, as reduced to the extent that the 1995 Bonds are paid off on or after the Closing Date (the “1995 Bond Reserve”).

6.Revolver Increases.  The Credit Agreement is hereby amended by (a) deleting each reference to “Tranche A Commitment” and “Tranche A Commitments” set forth in Section 2.2 and inserting “Commitment” and “Commitments”, as applicable, in lieu thereof, and (b) deleting each reference to “Tranche A Advance” set forth in Section 2.2 and inserting “Advances” in lieu thereof.

7.Protective Advances and Optional Overadvances.  The Credit Agreement is hereby amended by deleting Section 2.3(d)(ii)(A) and inserting the following in lieu thereof:

(A) after giving effect to such Advances, the outstanding Revolver Usage does not exceed the Borrowing Base by more than 7.5% of the Maximum Revolver Amount, and

8.Application of Payments Before Application Event.  The Credit Agreement is hereby amended by deleting Section 2.4(b)(i) and inserting the following in lieu thereof:

(i)    So long as no Application Event has occurred and is continuing and except as otherwise provided herein with respect to Defaulting Lenders, all principal and interest payments received by Agent shall be apportioned ratably among the Lenders (according to the unpaid principal balance of the Obligations to which such payments relate held by each Lender) and all payments of fees and expenses received by Agent (other than fees or expenses that are for Agent’s separate account or for the separate account of the Issuing Lender) shall be apportioned ratably among the Lenders having a Pro Rata Share of the type of Commitment or Obligation to which a particular fee or expense relates.  All payments to be made hereunder by Borrowers shall be remitted to Agent and all (subject to Section 2.4(b)(iv), Section 2.4(d)(ii), and Section 2.4(e)) such payments, and all proceeds of Collateral received by Agent, shall be applied, so long as no Application Event has occurred and is continuing, to reduce the balance of the Advances outstanding and, thereafter, to Borrowers (to be wired to the Designated Account) or such other Person entitled thereto under applicable law.

9.Application of Payments After Application Event.  The Credit Agreement is hereby amended by deleting clauses (I) through (P) of Section 2.4(b)(ii) and inserting the following in lieu thereof:

(I)    ninth, ratably, to pay interest accrued in respect of the Advances (other than Protective Advances) until paid in full,
(J)    tenth, ratably (i) to pay the principal of all Advances until paid in full, (ii) to Agent, to be held by Agent, for the benefit of Issuing Lender (and for the ratable benefit of each of the Lenders that have an obligation to pay to Agent, for the account of the Issuing Lender, a share of each Letter of Credit Disbursement), as cash collateral in an amount up to 105% of the Letter of Credit Usage (to the extent permitted by applicable law, such cash collateral shall be applied to the reimbursement of any Letter of Credit Disbursement as and when such disbursement occurs and, if a Letter of Credit expires undrawn, the cash collateral held by Agent in respect of such Letter of Credit shall, to the extent permitted by applicable law, be reapplied pursuant to this Section 2.4(b)(ii), beginning with tier (A) hereof), (iii) to Agent to pay the principal and accrued interest on any portion of the 1995 Bonds (to the extent due) outstanding, to be shared with the Lenders in accordance with their Pro Rata Shares in the 1995 Bonds, and (iv) ratably, in an amount up to the Bank Product Reserve Amount, to the Hedge Providers based upon amounts then certified by the applicable Hedge Provider to Agent (in form and substance satisfactory to Agent) to be due and payable to such Hedge Providers on account of Hedge Obligations,
(K)    eleventh, ratably, to the Bank Product Providers based upon amounts then certified by the applicable Bank Product Provider to Agent (in form and substance satisfactory to Agent) to be due and payable to such Bank Product Providers on account of Bank Product Obligations (other than Hedge Obligations),
(L)    twelfth, to pay any other Obligations other than Obligations owed to Defaulting Lenders,
(M)    thirteenth, ratably to pay any Obligations owed to Defaulting Lenders; and
(N)    fourteenth, to Borrowers (to be wired to the Designated Account) or such other Person entitled thereto under applicable law.

10.Termination of Commitments.  The Credit Agreement is hereby amended by deleting the first sentence of Section 2.4(c) and inserting the following in lieu thereof:

The Commitments shall terminate on the Maturity Date.

11.Borrowing Base Excess.  The Credit Agreement is hereby amended by deleting Section 2.4(e)(i) and inserting the following in lieu thereof:

(i)    Borrowing Base.  If, at any time, (A) the Revolver Usage on such date exceeds (B) the Borrowing Base (such excess being referred to as the “Borrowing Base Excess”), then Borrowers shall immediately prepay the Obligations in accordance with Section 2.4(f) in an aggregate amount equal to the Borrowing Base Excess.

12.Repayment at Maturity.  The Credit Agreement is hereby amended by deleting the last two sentences of Section 2.5 and inserting the following in lieu thereof:

Borrowers promise to pay the Obligations (including principal, interest, fees, costs, and expenses) in full on the Maturity Date or, if earlier, on the date on which the Obligations (other than the Bank Product Obligations) become due and payable pursuant to the terms of this Agreement.

13.Interest Rates.  The Credit Agreement is hereby amended by deleting Section 2.6(a)(i) and inserting the following in lieu thereof:

(i)    if the relevant Obligation is a LIBOR Rate Loan, at a per annum rate equal to the LIBOR Rate plus the Applicable Margin, and

14.Letter of Credit Fee. The Credit Agreement is hereby amended by deleting Section 2.6(b) and inserting the following in lieu thereof:

(b)    Letter of Credit Fee.  Borrowers shall pay Agent (for the ratable benefit of the Lenders with a Commitment), a Letter of Credit fee (in addition to the charges, commissions, fees, and costs set forth in Section 2.11(e)) which shall accrue at a per annum rate equal to the Applicable Margin for LIBOR Rate Loans times the Daily Balance of the undrawn amount of all outstanding Letters of Credit.

15.Letter of Credit Sublimit.  The Credit Agreement is hereby amended by deleting clauses (i), (ii), and (iii) of Section 2.11(a) and inserting the following in lieu thereof (it being agreed that the language following the such clause (iii) is not deleted or modified by this subsection):

(i)    the Letter of Credit Usage would exceed the Borrowing Base less the outstanding amount of Advances (inclusive of Swing Loans), or
(ii)    the Letter of Credit Usage would exceed $10,000,000, or
(iii)    the Letter of Credit Usage would exceed the Maximum Revolver Amount less the outstanding amount of Advances (including Swing Loans).

16.Letters of Credit; Change in Law.  The Credit Agreement is hereby amended by deleting  clause (y) of Section 2.11(g) and inserting the following in lieu thereof:

(y) any Change in Law, or

17.Special Provisions Applicable to LIBOR Rate and Index Rate.  The Credit Agreement is hereby amended by deleting Section 2.12(d) and Section 2.12(e) of the Credit Agreement and inserting the following in lieu thereof :

(d)    Special Provisions Applicable to LIBOR Rate.

(i)    The LIBOR Rate may be adjusted by Agent with respect to any Lender on a prospective basis to take into account any additional or increased costs to such Lender of maintaining or obtaining any eurodollar deposits or increased costs, in each case, due to changes in applicable law occurring subsequent to the commencement of the then applicable Interest Period, including any Changes in Law (including any changes in tax laws (except changes of general applicability in corporate income tax laws)) and changes in the reserve requirements imposed by the Board of Governors, which additional or increased costs would increase the cost of funding or maintaining loans bearing interest at the LIBOR Rate.  In any such event, the affected Lender shall give Borrowers and Agent notice of such a determination and adjustment and Agent promptly shall transmit the notice to each other Lender and, upon its receipt of the notice from the affected Lender,  Borrowers may, by notice to such affected Lender (A) require such Lender to furnish to Borrowers a statement setting forth in reasonable detail the basis for adjusting such LIBOR Rate and the method for determining the amount of such adjustment, or (B) repay the LIBOR Rate Loans of such Lender with respect to which such adjustment is made (together with any amounts due under Section 2.12(b)(ii)).

(ii)    In the event that any change in market conditions or any Change in Law shall at any time after the date hereof, in the reasonable opinion of any Lender, make it unlawful or impractical for such Lender to fund or maintain LIBOR Rate Loans or  to continue such funding or maintaining, or to determine or charge interest rates at the LIBOR Rate, such Lender shall give notice of such changed circumstances to Agent and Borrowers and Agent promptly shall transmit the notice to each other Lender and (x) in the case of any LIBOR Rate Loans of such Lender that are outstanding, the date specified in such Lender’s notice shall be deemed to be the last day of the Interest Period of such LIBOR Rate Loans, (y) interest upon the LIBOR Rate Loans, of such Lender thereafter shall accrue interest at the rate then applicable to Base Rate Loans, and (z) Borrowers shall not be entitled to elect the LIBOR Option until such Lender determines that it would no longer be unlawful or impractical to do so.

(e)    No Requirement of Matched Funding.  Anything to the contrary contained herein notwithstanding, neither Agent, nor any Lender, nor any of their Participants, is required actually to acquire eurodollar deposits to fund or otherwise match fund any Obligation as to which interest accrues at the LIBOR Rate.

18.Tranche B Advances and Index Rate Loans.  The Credit Agreement is hereby amended by deleting Section 2.12(f).  

19.Capital Requirements.  The Credit Agreement is hereby amended by (a) deleting Section 2.13(a) and inserting the following in lieu thereof, and (b) deleting each the words “or Index Rate Loans, as applicable” in each place they appear in Section 2.13(b):

(a)    If, after the date hereof, Issuing Lender or any Lender determines that (i) any Change in Law regarding capital or reserve requirements for banks or bank holding companies, or (ii) compliance by Issuing Lender or such Lender, or their respective parent bank holding companies, with any guideline, request or directive of any Governmental Authority regarding capital adequacy (whether or not having the force of law), has the effect of reducing the return on Issuing Lender’s, such Lender’s, or such holding companies’ capital as a consequence of Issuing Lender’s or such Lender’s commitments hereunder to a level below that which Issuing Lender, such Lender, or such holding companies could have achieved but for such Change in Law or compliance (taking into consideration Issuing Lender’s, such Lender’s, or such holding companies’ then existing policies with respect to capital adequacy and assuming the full utilization of such entity’s capital) by any amount deemed by Issuing Lender or such Lender to be material, then Issuing Lender or such Lender may notify Borrowers and Agent thereof.  Following receipt of such notice, Borrowers agree to pay Issuing Lender or such Lender on demand the amount of such reduction of return of capital as and when such reduction is determined, payable within 30 days after presentation by Issuing Lender or such Lender of a statement in the amount and setting forth in reasonable detail Issuing Lender’s or such Lender’s calculation thereof and the assumptions upon which such calculation was based (which statement shall be deemed true and correct absent manifest error).  In determining such amount, Issuing Lender or such Lender may use any reasonable averaging and attribution methods.  Failure or delay on the part of Issuing Lender or any Lender to demand 

compensation pursuant to this Section shall not constitute a waiver of Issuing Lender’s or such Lender’s right to demand such compensation; provided that Borrowers shall not be required to compensate Issuing Lender or a Lender pursuant to this Section for any reductions in return incurred more than 180 days prior to the date that Issuing Lender or such Lender notifies Borrowers of such Change in Law giving rise to such reductions and of such Lender’s intention to claim compensation therefor; provided further that if such claim arises by reason of the Change in Law that is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

20.Certain References to Maturity Date.  The Credit Agreement is hereby amended by deleting each reference to “Tranche A Maturity Date” set forth in Section 2.15(d)(iii) and inserting “Maturity Date” in lieu thereof.

21.Maturity and Effect of Maturity.  The Credit Agreement is hereby amended by deleting Section 3.3 and Section 3.4 and inserting the following in lieu thereof:

3.3    Maturity.  This Agreement shall continue in full force and effect for a term ending on September 23, 2021 (the “Maturity Date”).  The foregoing notwithstanding, the Lender Group, upon the election of the Required Lenders, shall have the right to terminate its obligations under this Agreement immediately and without notice upon the occurrence and during the continuation of an Event of Default.

3.4    Effect of Maturity.  On the Maturity Date, all commitments of the Lender Group to provide additional credit hereunder shall automatically be terminated and all of the Obligations immediately shall become due and payable without notice or demand and Borrowers shall be required to repay all of the Obligations in full.  No termination of the obligations of the Lender Group (other than payment in full of the Obligations and termination of the Commitments) shall relieve or discharge any Loan Party of its duties, obligations, or covenants hereunder or under any other Loan Document and Agent’s Liens in the Collateral shall continue to secure the Obligations and shall remain in effect until all Obligations have been paid in full and the Commitments have been terminated.  When all of the Obligations have been paid in full and the Lender Group’s obligations to provide additional credit under the Loan Documents have been terminated irrevocably, Agent will, at Borrowers’ sole expense, execute and deliver any termination statements, lien releases, discharges of security interests, and other similar discharge or release documents (and, if applicable, in recordable form) as are reasonably necessary to release, as of record, Agent’s Liens and all notices of security interests and liens previously filed by Agent.

22.Senior Indebtedness.  The Credit Agreement is hereby amended by deleting Section 4.32 and inserting the following in lieu thereof:

4.32    [Reserved.]

23.Prepayments and Amendments.  The Credit Agreement is hereby amended by deleting Section 6.7(a) and inserting the following in lieu thereof:

(a)    Except in connection with Refinancing Indebtedness permitted by Section 6.1,

(i)    optionally prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness of any Borrower and its Subsidiaries, other than (A) the Obligations in accordance with this Agreement, (B) Permitted Intercompany Advances, (C) to the extent a Borrower is the holder thereof, the 1991 Bonds, (D) the 1995 Bonds, and (E) so long as no Default or Event of Default exists or would result therefrom, other Permitted Indebtedness, or

(ii)    make any payment on account of Indebtedness that has been contractually subordinated in right of payment to the Obligations if such payment is not permitted at such time under the subordination terms and conditions applicable thereto, or

24.Use of Proceeds.  The Credit Agreement is hereby amended by deleting Section 6.13 and inserting the following in lieu thereof:

6.13    Use of Proceeds. Use the proceeds of any loan made hereunder for any purpose other than (a) on the Closing Date, (i) to repay, in full, the outstanding principal, accrued interest, and accrued fees and expenses owing under or in connection with the Existing Credit Facility, and (ii) to pay transactional fees, costs, and expenses incurred in connection with this Agreement, the other Loan Documents, and the transactions contemplated hereby and thereby, and (b) thereafter, consistent with the terms and conditions hereof, for their lawful and permitted purposes (including that no part of the proceeds of the loans made to Borrowers will be used to purchase or carry any such Margin Stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock or for any purpose that violates the provisions of Regulation T, U or X of the Board of Governors of the United States Federal Reserve).

25.Revision to Events of Default.  The Credit Agreement is hereby amended by deleting Section 8.8 and inserting the following in lieu thereof:

8.8    If a default or event of default occurs under any of the Bond Documents and such default or event of default shall continue beyond any applicable grace or cure period;

26.Revision to Amendment Provisions.  The Credit Agreement is hereby amended by deleting Section 14.1(a)(xii) and inserting the following in lieu thereof:

(xii)    amend, modify, or eliminate the definition of Borrowing Base or any of the defined terms (including the definitions of Eligible Accounts, Eligible Inventory, Eligible M&E, Eligible Real Property, Eligible In-Transit Inventory and Eligible Landed Inventory) that are used in such definition to the extent that any such change results in more credit being made available to Borrowers based upon the Borrowing Base, but not otherwise, or the definitions of Maximum Revolver Amount, or change Section 2.1(c).

27.Revised Schedules and Exhibits.  The Credit Agreement is hereby amended by (a) deleting Exhibit A-1 (Form of Assignment and Acceptance), Exhibit B-1 (Form of Borrowing Base Certificate) Schedule A-2, Schedule C-1, Schedule R-1, Schedule 4.1(b), Schedule 4.1(c), Schedule 4.6(a), Schedule 4.6(b), Schedule 4.6(c), Schedule 4.6(d), Schedule 4.7(b), Schedule 4.8, Schedule 4.11, Schedule 4.12, Schedule 4.13, Schedule 4.15, Schedule 4.17, Schedule 4.19, Schedule 4.20, Schedule 4.24, Schedule 4.27, Schedule 4.30, and Schedule 6.6 and substituting the Exhibit A-1 (Form of Assignment and Acceptance), Exhibit B-1 (Form of Borrowing Base Certificate), Schedule A-2, Schedule C-1, Schedule R-1, Schedule 4.1(b), Schedule 4.1(c), Schedule 4.6(a), Schedule 4.6(b), Schedule 4.6(c), Schedule 4.6(d), Schedule 4.7(b), Schedule 4.8, Schedule 4.11, Schedule 4.12, Schedule 4.13, Schedule 4.15, Schedule 4.17, Schedule 4.19, Schedule 4.20, Schedule 4.24, Schedule 4.27, Schedule 4.30, and Schedule 6.6 attached hereto in lieu thereof, and (b) deleting all references to “Convertible Debentures Documents” set forth in Schedule 3.1.

28.Certain References to Borrowing Base.  The Credit Agreement is hereby amended by deleting the references to “the Tranche A Borrowing Base or Tranche B Borrowing Base” set forth in clauses (c) and (e) of Schedule 5.2 (Collateral Reporting) and substituting “the Borrowing Base” in lieu thereof.

		
	III.
	     AMENDMENTS TO SECURITY AGREEMENT.

Subject to the satisfaction of each of the conditions precedent set forth in Section V of this Amendment, the Security Agreement is hereby amended as follows:

1.Recitals.  The Security Agreement is hereby amended by adding the following proviso to the end of the final WHEREAS clause of the recitals:
; provided that, any other term or provision of this Agreement to the contrary notwithstanding, the Secured Obligations shall not, as to any Grantor, include any Excluded Swap Obligations of such Grantor.

2.Additional Definitions.  The Security Agreement is hereby amended to include, in addition and not in limitation, the following new definitions in appropriate alphabetical order in Section 1 thereof:
“Excluded Swap Obligation” means, with respect to any Grantor, any Swap Obligation if, and to the extent that, all or a portion of any guarantee (in whatever form) of such Grantor of, or the grant by such Grantor of a security interest to secure, such Swap Obligation (or any guarantee (in whatever form) thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Grantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time any guarantee (in whatever form) of such Grantor or the grant of such security interest becomes effective with respect to such Swap Obligation.  If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which any such guarantee or security interest is or becomes illegal.
“Qualified ECP Grantor” means, in respect of any Swap Obligation, each Grantor that has total assets exceeding $10,000,000 at the time the relevant guaranty (in whatever form), keepwell, or grant of the relevant security interest becomes effective with respect to such Swap Obligation or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
“Swap Obligation” means, with respect to any Grantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.
3.Secured Obligations.  The Security Agreement is hereby amended by deleting the defined term “Secured Obligations” and inserting the following in lieu thereof:
“Secured Obligations” means each and all of the following: (i) all of the present and future obligations of each of the Grantors arising from, or owing under or pursuant to, this Agreement, the Credit Agreement, or any of the other Loan Documents (including any Guaranty), (ii) all Bank Product Obligations, and (iii) all other Obligations of the Borrowers (including, in the case of each of clauses (i), (ii) and (iii), reasonable attorneys' fees and expenses and any interest, fees, or expenses that accrue after the filing of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any Insolvency Proceeding); provided, however, that Secured Obligations shall not include any Excluded Swap Obligation.
4.Keepwell.  The Security Agreement is hereby amended by inserting the following new Section 27 in appropriate numerical order:
27.    Keepwell.  Each Qualified ECP Grantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Grantor to guaranty and otherwise honor all Obligations in respect of Swap Obligations (provided, however, that each Qualified ECP Grantor shall only be liable under this Section 27 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 27, or otherwise under the Loan Documents, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount).  The obligations of each Qualified ECP Grantor under this section shall remain in full force and effect until payment in full of the Secured Obligations.  Each Qualified ECP Grantor intends that this Section 27 constitute, and this Section 27 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Grantor for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
		
	IV.
	     AMENDMENTS TO GUARANTY.

Subject to the satisfaction of each of the conditions precedent set forth in Section V of this Amendment, the Guaranty is hereby amended as follows:

1.Recitals.  The following proviso is added to the end of the last WHEREAS clause of the Guaranty Agreement recitals:
; provided that, any other term or provision of this Agreement to the contrary notwithstanding, the Guarantied Obligations shall not, as to Guarantor, include any Excluded Swap Obligations of Guarantor.
2.Additional Excluded Swap Obligation Definitions.  The Guaranty is hereby amended to include, in addition and not in limitation, the following new definitions in appropriate alphabetical order in Section 1 thereof: 
“Excluded Swap Obligation” means, with respect to Guarantor, any Swap Obligation if, and to the extent that, all or a portion of any guarantee (in whatever form) of Guarantor of, or the grant by Guarantor of a security interest to secure, such Swap Obligation (or any guarantee (in whatever form) thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time any guarantee (in whatever form) of Guarantor or the grant of such security interest becomes effective with respect to such Swap Obligation.  If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which any such guarantee or security interest is or becomes illegal.
“Swap Obligation” means, with respect to Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.
		
	V.
	     CONDITIONS PRECEDENT

This Amendment shall become effective as of the date hereof (the “Tenth Amendment Effective Date”), subject to the following conditions precedent having been satisfied or waived by Agent:

1.Execution of Amendment.  Agent shall have received fully executed counterparts of this Amendment, duly authorized, executed and delivered by each Borrower, Guarantor and the Required Lenders.

2.Opinion.  Agent shall have received an opinion of counsel to the Loan Parties in form and substance reasonably satisfactory to Agent.

3.Amendment Fee.  Agent shall have received an amendment fee in the amount of $100,000 (with each Lender to receive its Pro Rata Share thereof), and Borrowers hereby authorize Agent to charge the Loan Account for such amendment fee.

4.Phase I Reports.  Agent shall have received Phase I environmental reports with respect to all Real Property Collateral from one or more environmental consultants that are acceptable to Agent, and the scope and results of such Phase I Environmental reports shall be acceptable to Agent.
5.Accuracy of Representations and Warranties.  Each of the representations and warranties of the Loan Parties set forth in Section 4 of the Credit Agreement shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof).

6.Other Documents.  Agent shall have received such other agreements, documents, instruments, officer’s certificates, and information executed and/or delivered by the Loan Parties as Agent may reasonably request.

		
	VI.
	     MISCELLANEOUS

1.No Additional Obligations

.  The Borrowers acknowledge and agree that the execution, delivery and performance of this Amendment shall not create (nor shall the Borrowers rely upon the existence of or claim or assert that there exists) any obligation of any of Agent or Lenders to consider or agree to any other amendment of or waiver or consent with respect to the Credit Agreement or any other instrument or agreement to which Agent or any Lender is a party (collectively, an “Additional Amendment” or “Consent”), and in the event that Agent and the Lenders subsequently agree to consider any requested Additional Amendment or Consent, neither the existence of this Amendment nor any other conduct of Agent or the Lenders related hereto, shall be of any force or effect on the Lenders’ consideration or decision with respect to any such requested Additional Amendment or Consent, and the Lenders shall not have any obligation whatsoever to consider or agree to any such Additional Amendment or Consent.

2.Acknowledgments and Stipulations
.  In order to induce Agent and Lenders to enter into this Amendment, each Borrower acknowledges, stipulates and agrees that (a) the Loan Documents executed by each Borrower are legal, valid and binding obligations of such Borrower enforceable against such Borrower in accordance with their respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally; (b) the Liens granted by each Borrower to Agent in the Collateral are valid and duly perfected, first priority Liens, subject only to Permitted Liens; (c) each of the recitals contained at the beginning of this Amendment is true and correct; and (d) prior to executing this Amendment, each Borrower consulted with and had the benefit of advice of legal counsel of its own selection and has relied upon the advice of such counsel, and in no part upon the representation of Agent, any Lender or any counsel to Agent or any Lender concerning the legal effects of this Amendment or any provision hereof.

3.Additional Representations and Warranties of the Borrowers
.  Each Borrower hereby represents and warrants that on the Tenth Amendment Effective Date and after giving effect to the amendments and waivers contained herein:  (a) the representations and warranties contained in Section 4 of the Credit Agreement shall be correct in all material respects on and as of such date as though made on and as of such date, (b) no Default or Event of Default exists under the Credit Agreement on and as of such date, and (c) the Convertible Debentures (as defined in the Credit Agreement prior to giving effect to this Amendment) have been paid in full and no outstanding obligations remain with respect thereto.  Without limitation of the preceding sentence, each Borrower hereby expressly re-affirms the validity, effectiveness and enforceability of each Loan Document to which it is a party (in each case, as the same may be modified by the terms of this Amendment).  

4.Effect of this Agreement
.  Except as expressly amended pursuant hereto, no other changes or modifications to the Credit Agreement or any of the other Loan Documents are intended or implied, and in all other respects, the Credit Agreement and each of the other Loan Documents is hereby specifically ratified, restated and confirmed by all parties hereto as of the date hereof.  To the extent that any provision of the Credit Agreement or any of the other Loan Documents are inconsistent with the provisions of this Amendment, the provisions of this Amendment shall control.  All references in the Credit Agreement (including without limitation the Schedules thereto) to the “Agreement” and all references in the other Loan Documents to the “Credit Agreement” shall be deemed to refer to the Credit Agreement, as amended hereby.

5.Further Assurances
.  The Loan Parties shall execute and deliver such additional documents and take such additional action as may be reasonably requested by Agent to effectuate the provisions and purposes hereof.

6.Governing Law
.  THE VALIDITY OF THIS AMENDMENT, THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF, THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO, AND ANY CLAIMS, CONTROVERSIES OR DISPUTES ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA.

7.Binding Effect

.  This Amendment shall bind and inure to the benefit of the respective successors and permitted assigns of each of the parties hereto.

8.Counterparts; Electronic Execution
.  This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same agreement.  Delivery of an executed counterpart of this Amendment by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Amendment.  Any party delivering an executed counterpart of this Amendment by telefacsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Amendment but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Amendment.

9.Successors and Assigns
.  This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

[Remainder of Page Intentionally Left Blank]
TENTH AMENDMENT TO CREDIT AGREEMENT
ATL 21402695v8

Each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written.

	
		
	BORROWERS:
	THE DIXIE GROUP, INC.

By: /s/ Jon A. Faulkner             
Name: Jon A. Faulkner 
Title: VP/CFO

	 
	CANDLEWICK YARNS, LLC

By: /s/ Jon A. Faulkner
Name: Jon A. Faulkner 
Title: President

	 
	FABRICA INTERNATIONAL, INC.

By: /s/ Jon A. Faulkner
Name: Jon A. Faulkner 
Title: President

	 
	TDG OPERATIONS, LLC

By: /s/ Jon A. Faulkner
Name: Jon A. Faulkner 
Title: President

	
		
	AGENT AND LENDERS:
	WELLS FARGO CAPITAL FINANCE, LLC, 
as Agent and as a Lender

By: /s/ Zachary S. Buchanan
Name: Zachary S. Buchanan
Title: Authorized Signatory

	 
	BANK OF AMERICA, N.A.,
as a Lender

By: /s/ Todd Tarrance
Name: Todd Tarrance
Title: VP

GUARANTOR’S ACKNOWLEDGEMENT

The undersigned, a guarantor of the Obligations of THE DIXIE GROUP, INC., a Tennessee corporation (“Dixie”), CANDLEWICK YARNS, LLC, an Alabama limited liability company (“Candlewick”), FABRICA INTERNATIONAL, INC., a California corporation (“Fabrica”), TDG OPERATIONS, LLC, a Georgia limited liability company, formerly known as Masland Carpets, LLC (“TDG”; together with Dixie, Candlewick and Fabrica, are referred to hereinafter each individually as a “Borrower”, and collectively, the “Borrowers”), under and as defined in that certain Credit Agreement, dated as of September 13, 2011, as amended by the First Amendment to Credit Agreement, dated as of November 2, 2012, the Second Amendment to Credit Agreement, dated as of April 1, 2013, the Third Amendment to Credit Agreement, dated as of May 22, 2013, the Fourth Amendment to Credit Agreement, dated as of July 1, 2013, the Fifth Amendment to Credit Agreement, dated as of July 30, 2013, the Sixth Amendment to Credit Agreement dated as of August 30, 2013, the Seventh Amendment to Credit Agreement dated as of January 20, 2014, the Eighth Amendment to Credit Agreement dated as of March 14, 2014, the Ninth Amendment to Credit Agreement dated as of March 26, 2014, and the Tenth Amendment to Credit Agreement, First Amendment to Security Agreement, and First Amendment to Guaranty (the “Tenth Amendment”) dated as of the date hereof (as amended, restated, supplemented, or otherwise modified prior to the date hereof, the “Credit Agreement”) among the Borrowers, the lenders party thereto (the “Lenders”), WELLS FARGO CAPITAL FINANCE, LLC, a Delaware limited liability company, as administrative agent for the Lenders (in such capacity, together with its successors and assigns in such capacity, the “Agent”), hereby (a) acknowledges receipt of the foregoing Tenth Amendment; (b) consents to the terms thereof and the execution thereof by the Borrowers; (c) reaffirms its obligations pursuant to the terms of the Guaranty Agreement, dated as of September 13, 2011, by the undersigned in favor of Agent and Lenders (the “Guaranty”); and (d) acknowledges that Agent and the Lenders may amend, restate, extend, renew or otherwise modify the Credit Agreement and any indebtedness or agreement of the Borrowers, or enter into any agreement or extend additional or other credit accommodations to the Borrowers, without notifying or obtaining the consent of the undersigned and without impairing the liability of the undersigned under the Guaranty for the Borrowers’ present and future Obligations.  Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement.

	
		
	 
	C-KNIT APPAREL, INC.

By: /s/ Jon A. Faulkner
Name: Jon A. Faulkner 
Title: President

	 
	 

EXHIBIT A-1
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
THIS ASSIGNMENT AND ACCEPTANCE AGREEMENT (this “Assignment Agreement”) is entered into as of _________ ___, 20___ between __________________ (“Assignor”) and __________________ (“Assignee”).  Reference is made to the Credit Agreement described in Annex I hereto (as it may be amended, restated, supplemented or otherwise modified, the “Credit Agreement”).  Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.
1.    In accordance with the terms and conditions of Section 13 of the Credit Agreement, the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, that interest in and to the Assignor’s rights and obligations under the Loan Documents as of the date hereof with respect to the Obligations owing to the Assignor, and Assignor’s portion of the Commitments (together with all or such portion of such Assignor’s corresponding Pro Rata Share in the 1995 Bonds), all to the extent specified on Annex I.
2.    The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim and (ii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment Agreement and to consummate the transactions contemplated hereby; (b) makes no representation or warranty and assumes no responsibility with respect to (i) any statements, representations or warranties made in or in connection with the Loan Documents, or (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any other instrument or document furnished pursuant thereto; (c) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower or Guarantor or the performance or observance by any Borrower or Guarantor of any of their respective obligations under the Loan Documents or any other instrument or document furnished pursuant thereto, and (d) represents and warrants that the amount set forth as the Purchase Price on Annex I represents the amount owed by Borrowers to Assignor with respect to Assignor’s share of the Advances assigned hereunder, as reflected on Assignor’s books and records.
3.    The Assignee (a) confirms that it has received copies of the Credit Agreement and the other Loan Documents, together with copies of the financial statements referred to therein and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement; (b) agrees that it will, independently and without reliance upon Agent, Assignor, or any other Lender, based upon such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under the Loan Documents; (c) confirms that it is an Eligible Transferee; (d) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to Agent by the terms thereof, together with such powers as are reasonably incidental thereto; [and] (e) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender; [and (f) attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee’s status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the 

Credit Agreement or such other documents as are necessary to indicate that all such payments are subject to such rates at a rate reduced by an applicable tax treaty.]
4.    Following the execution of this Assignment Agreement by the Assignor and Assignee, the Assignor will deliver this Assignment Agreement to the Agent for recording by the Agent.  The effective date of this Assignment (the “Settlement Date”) shall be the latest to occur of (a) the date of the execution and delivery hereof by the Assignor and the Assignee, (b) the receipt by Agent for its sole and separate account a processing fee in the amount of $3,500 (if required by the Credit Agreement), (c) the receipt of any required consent of the Agent, and (d) the date specified in Annex I.
5.    As of the Settlement Date (a) the Assignee shall be a party to the Credit Agreement and, to the extent of the interest assigned pursuant to this Assignment Agreement, have the rights and obligations of a Lender thereunder and under the other Loan Documents, and (b) the Assignor shall, to the extent of the interest assigned pursuant to this Assignment Agreement, relinquish its rights and be released from its obligations under the Credit Agreement and the other Loan Documents, provided, however, that nothing contained herein shall release any Assignor from obligations that survive the termination of this Assignment Agreement, including such Assignor’s obligations under Article 15 Section 17.9(a) of the Credit Agreement.
6.    Upon the Settlement Date, Assignee shall pay to Assignor the Purchase Price (as set forth in Annex I).  From and after the Settlement Date, Agent shall make all payments that are due and payable to the holder of the interest assigned hereunder (including payments of principal, interest, fees and other amounts) to Assignor for amounts which have accrued up to but excluding the Settlement Date and to Assignee for amounts which have accrued from and after the Settlement Date.  On the Settlement Date, Assignor shall pay to Assignee an amount equal to the portion of any interest, fee, or any other charge that was paid to Assignor prior to the Settlement Date on account of the interest assigned hereunder and that are due and payable to Assignee with respect thereto, to the extent that such interest, fee or other charge relates to the period of time from and after the Settlement Date.
7.    This Assignment Agreement may be executed in counterparts and by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.  This Assignment Agreement may be executed and delivered by telecopier or other facsimile transmission all with the same force and effect as if the same were a fully executed and delivered original manual counterpart.
8.    THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.

IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement and Annex I hereto to be executed and delivered as of the date first above written.
	
		
	 
	[NAME OF ASSIGNOR],
as Assignor
By:
Name:
Title:

	 
	[NAME OF ASSIGNEE]
as Assignee
By:
Name:
Title:

ACCEPTED THIS ___ DAY OF
_________, 20___
	
	
	WELLS FARGO CAPITAL FINANCE, LLC,
a Delaware limited liability company, as Agent
By:
Name:
Title:

	[THE DIXIE GROUP, INC., a Tennessee corporation, as Administrative Borrower
By:
Name:
Title:  ]  
[ONLY INCLUDE IF NO EVENT OF DEFAULT]Exhibit 10.1

Execution Copy

 

XBIOTECH
INC.

 

$50,260,000

cOMMON STOCK

SALES AGREEMENT

 

September 26, 2016

 

 

 

H.C. Wainwright & Co. LLC

430 Park Avenue

New York, NY 10022

 

Ladies and Gentlemen:

 

XBiotech Inc. (the “Company”),
confirms its agreement (this “Agreement”) with H.C. Wainwright & Co. LLC (“HCW”),
as follows:

 

1.               
Issuance and Sale of Placement Shares. Company agrees that, from time to time during the term of this Agreement,
on the terms and subject to the conditions set forth herein, it may issue and sell through HCW, shares (the “Placement
Shares”); of the Company’s common stock, no par value per share (the “Common Stock”);
provided however, that in no event shall the Company issue or sell through HCW such number of Placement Shares that (a)
exceeds the number of shares or dollar amount of Common Stock registered on the effective Registration Statement (as defined below)
pursuant to which the offering is being made, or (b) exceeds the number of shares or dollar amount registered on the Prospectus
Supplement (as defined below), (the lesser of (a) or (b), the “Maximum Amount”). Notwithstanding anything
to the contrary contained herein, the parties hereto agree that compliance with the limitations set forth in this Section 1
on the number of Placement Shares issued and sold under this Agreement shall be the sole responsibility of the Company and that
HCW shall have no obligation in connection with such compliance. The issuance and sale of Placement Shares through HCW will be
effected pursuant to the Registration Statement (as defined below), although nothing in this Agreement shall be construed as requiring
the Company to use the Registration Statement to issue any Placement Shares.

 

The Company has filed,
in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations thereunder (the “Securities
Act”), with the Securities and Exchange Commission (the “Commission”), a registration statement
on Form S-3, including a base prospectus (the “Base Prospectus”) relating to certain Company securities,
including the Placement Shares, to be offered and sold from time to time by the Company, and which incorporates by reference documents
that the Company has filed or will file with the Commission in accordance with the provisions of the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder (the “Exchange Act”). The Company shall include,
within the Registration Statement, a prospectus supplement to the Base Prospectus specifically relating to the offer and sale of
the Placement Shares (the “Prospectus Supplement”). Upon request, the Company will furnish to HCW such
number of copies of the Base Prospectus and the Prospectus Supplement as HCW shall reasonably request.

 

    

     

    

Except where the context
otherwise requires, the registration statement, including all documents filed as part thereof or incorporated by reference therein,
and including any information contained in a Prospectus (as defined below) subsequently filed with the Commission pursuant to Rule
424(b) under the Securities Act, or deemed to be a part of such registration statement pursuant to Rule 430B of the Securities
Act, is herein called the “Registration Statement.” The prospectus relating to the Placement Shares,
including all documents incorporated or deemed incorporated therein by reference (to the extent such information has not been superseded
or modified in accordance with Rule 412 under the Securities Act (as qualified by Rule 430B(g) of the Securities Act)), included
in the Registration Statement, as it may be supplemented by the Prospectus Supplement, in the form in which such Base Prospectus
and/or Prospectus Supplement have most recently been filed by the Company with the Commission pursuant to Rule 424(b) under the
Securities Act, is herein called the “Prospectus.” Any reference herein to the Registration Statement,
the Prospectus or any amendment or supplement thereto shall be deemed to refer to and include the documents incorporated or deemed
incorporated by reference therein, and any reference herein to the terms “amend,” “amendment” or “supplement”
with respect to the Registration Statement or the Prospectus shall be deemed to refer to and include the filing, after the date
of execution of this Agreement, of any document with the Commission that is deemed (pursuant to the Securities Act or the Exchange
Act) to be incorporated by reference therein.

 

For purposes of this
Agreement, all references to the Registration Statement, the Prospectus, any amendment or supplement to the Registration Statement
or the Prospectus, or to any documents incorporated by reference, shall be deemed to include the most recent copy of the relevant
document filed with the Commission pursuant to its Electronic Data Gathering Analysis and Retrieval System (“EDGAR”).

 

2.               
Placements. Each time that the Company wishes to issue and sell Placement Shares hereunder (each, a “Placement”),
it will notify HCW by email notice (or other method mutually agreed to in writing by the parties) (a “Placement Notice”)
containing the parameters in accordance with which it desires the Placement Shares to be sold, which shall at a minimum include
the number of Placement Shares to be issued, the time period during which sales are requested to be made, any limitation on the
number of Placement Shares that may be sold in any one Trading Day (as defined in Section 3) and any minimum price below which
sales may not be made, a form of which containing such minimum sales parameters necessary is attached hereto as Schedule
1. The Placement Notice shall originate from any of the individuals from the Company set forth on Schedule 2
(with a copy to each of the other individuals from the Company listed on such schedule), and shall be addressed to each of
the individuals from HCW set forth on Schedule 2, as such Schedule 2 may be amended from time to time.
The Placement Notice shall be effective upon receipt by HCW unless and until (i) in accordance with the notice requirements set
forth in Section 4, HCW declines to accept the terms contained therein for any reason, in its sole discretion, (ii) the entire
amount of the Placement Shares have been sold thereunder, (iii) in accordance with the notice requirements set forth in Section
4, the Company suspends or terminates the Placement Notice, (iv) the Company issues a subsequent Placement Notice with parameters
superseding those on the earlier dated Placement Notice, or (v) this Agreement has been terminated under the provisions of Section
11. The amount of any discount, commission or other compensation to be paid by the Company to HCW in connection with the
sale of the Placement Shares shall be calculated in accordance with the terms set forth in Schedule 3. It is expressly
acknowledged and agreed that neither the Company nor HCW will have any obligation whatsoever with respect to a Placement or any
Placement Shares unless and until the Company delivers a Placement Notice to HCW and HCW does not decline such Placement Notice
pursuant to the terms set forth above, and then only upon the terms specified therein and herein. In the event of a conflict between
the terms of this Agreement and the terms of a Placement Notice, the terms of the Placement Notice will control.

 

    

     

    

3.               
Sale of Placement Shares by HCW.

 

(a) Subject to
the terms and conditions herein set forth, upon the Company’s delivery of a Placement Notice, and unless the sale of the
Placement Shares described therein has been declined, suspended, or otherwise terminated in accordance with the terms of this Agreement,
HCW, for the period specified in the Placement Notice, will use its commercially reasonable efforts consistent with its normal
trading and sales practices and applicable state and federal laws, rules and regulations and the rules of the NASDAQ Global Select
Market (“Exchange”) to sell such Placement Shares up to the amount specified, and otherwise in accordance
with the terms of such Placement Notice. HCW will provide written confirmation to the Company (including by email correspondence
to each of the individuals of the Company set forth on Schedule 2, if receipt of such correspondence is actually
acknowledged by any of the individuals to whom the notice is sent, other than via auto-reply) no later than the opening of the
Trading Day (as defined below) immediately following the Trading Day on which it has made sales of Placement Shares hereunder setting
forth the number of Placement Shares sold on such day, the price(s) per share at which such Placement Shares were sold, the compensation
payable by the Company to HCW pursuant to Section 2 with respect to such sales and the Net Proceeds (as defined below) payable
to the Company. HCW may sell Placement Shares by any method permitted by law deemed to be an “at the market” offering
as defined in Rule 415 of the Securities Act, including without limitation sales made through Exchange, on any other existing trading
market for the Common Stock or to or through a market maker; provided that HCW shall not sell Placement Shares in Canada.
If expressly authorized by the Company in a Placement Notice, HCW may also sell Placement Shares in negotiated transactions. The
Company acknowledges and agrees that (i) there can be no assurance that HCW will be successful in selling Placement Shares, and
(ii) HCW will incur no liability or obligation to the Company or any other person or entity if it does not sell Placement Shares
for any reason other than a failure by HCW to use its commercially reasonable efforts consistent with its normal trading and sales
practices to sell such Placement Shares as required under this Section 3. For the purposes hereof, “Trading
Day” means any day on which the Company’s Common Stock is purchased and sold on the principal market on which
the Common Stock is listed or quoted.

 

    

     

    

HCW agrees and acknowledges
that they will not solicit any offers to sell the Placement Shares from persons resident in any province or territory of Canada
or from any person acquiring such Placement Shares for the benefit of another person resident in any province or territory of Canada.

 

(b) Limitations
on Offering Size. Under no circumstances shall the Company cause or request the offer or sale of any Placement Shares if, after
giving effect to the sale of such Placement Shares, the aggregate number of Placement Shares sold pursuant to this Agreement would
exceed the lesser of (A) together with all sales of Placement Shares under this Agreement, the Maximum Amount, and (B) the amount
authorized from time to time to be issued and sold under this Agreement by the Company’s board of directors, a duly authorized
committee thereof or a duly authorized executive committee, and notified to HCW in writing. Under no circumstances shall the Company
cause or request the offer or sale of any Placement Shares pursuant to this Agreement at a price lower than the minimum price authorized
from time to time by the Company’s board of directors, a duly authorized committee thereof or a duly authorized executive
committee, and notified to HCW in writing. Further, under no circumstances shall the Company cause or permit the aggregate offering
amount of Placement Shares sold pursuant to this Agreement to exceed the Maximum Amount.

 

4.               
Suspension of Sales.

 

(a)The Company or HCW may, upon notice
to the other party in writing (including by email correspondence to each of the individuals of the other party set forth on Schedule
2, if receipt of such correspondence is actually acknowledged by any of the individuals to whom the notice is sent, other
than via auto-reply) or by telephone (confirmed immediately by verifiable facsimile transmission or email correspondence to each
of the individuals of the other party set forth on Schedule 2), suspend any sale of Placement Shares; provided,
however, that such suspension shall not affect or impair either party’s obligations with respect to any Placement Shares
sold hereunder prior to the receipt of such notice. Each of the parties agrees that no such notice under this Section 4
shall be effective against the other unless it is made to one of the individuals named on Schedule 2 hereto, as such
schedule may be amended from time to time. While a suspension is in effect, any obligations under Sections 7(m), 7(n)
and 7(o) with respect to the delivery of certificates, opinions or comfort letters to HCW shall be deemed waived; provided,
however, that such waiver shall not apply for any Representation Date (as defined below) on which the Company files its
annual report on Form 10-K.

 

(b)Notwithstanding any other provision of this Agreement,
during any period in which the Company is in possession of material non-public information, the Company and HCW agree that (i)
no sale of Placement Shares will take place, (ii) the Company shall not request the sale of any Placement Shares, and (iii) HCW
shall not be obligated to sell or offer to sell any Placement Shares.

 

5.               
Settlement.

 

(a) Settlement
of Placement Shares. Unless otherwise specified in the applicable Placement Notice, settlement for sales of Placement Shares
will occur on the third (3rd) Trading Day (or such earlier day as is industry practice for regular-way trading) following
the date on which such sales are made (each, a “Settlement Date” and the first such settlement date,
the “First Delivery Date”). The amount of proceeds to be delivered to the Company on a Settlement Date
against receipt of the Placement Shares sold (the “Net Proceeds”) will be equal to the aggregate sales
price received by HCW at which such Placement Shares were sold, after deduction for (i) HCW’s commission, discount or
other compensation for such sales payable by the Company pursuant to Section 2 hereof, (ii) any other amounts due and payable
by the Company to HCW hereunder pursuant to Section 7(g) (Expenses) hereof, and (iii) any transaction fees imposed by any
governmental or self-regulatory organization in respect of such sales.

 

    

     

    

(b) Delivery
of Placement Shares. On or before each Settlement Date, the Company will, or will cause its transfer agent to, electronically
transfer the Placement Shares being sold by crediting HCW’s or its designee’s account (provided HCW shall have given
the Company written notice of such designee at least one Trading Day prior to the Settlement Date) at The Depository Trust Company
through its Deposit and Withdrawal at Custodian System (“DWAC”) or by such other means of delivery as
may be mutually agreed upon by the parties hereto which in all cases shall be freely tradable, transferable, registered shares
in good deliverable form. On each Settlement Date, HCW will deliver the related Net Proceeds in same day funds to an account designated
by the Company on, or prior to, the Settlement Date. The Company agrees that if the Company, or its transfer agent (if applicable),
defaults in its obligation to deliver duly authorized Placement Shares on a Settlement Date, in addition to and in no way limiting
the rights and obligations set forth in Section 9(a) (Indemnification and Contribution) hereto, it will (i) hold HCW
harmless against any loss, claim, damage, or reasonable, documented expense (including reasonable and documented legal fees and
expenses), as incurred, arising out of or in connection with such default by the Company and (ii) pay to HCW any commission, discount,
or other compensation to which it would otherwise have been entitled absent such default.

 

6.               
Representations and Warranties of the Company. The Company represents and warrants to, and agrees with, HCW that,
as of the effective date of the Registration Statement, each Representation Date (as defined in Section 7(m)), each date on which
a Placement Notice is given, and any date on which Placement Shares are sold hereunder:

 

(a) Compliance
with Registration Requirements. Prior to delivery of the first Placement Notice hereunder, the Registration Statement will
have been declared effective by the Commission under the Securities Act. The Company will have complied to the Commission’s
satisfaction with all requests, if any, of the Commission for additional or supplemental information related to the Registration
Statement or the Prospectus. No stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement shall be in effect and no proceedings for such purpose shall have been instituted or are pending or, to the best knowledge
of the Company, contemplated or threatened by the Commission.

 

(b)  No
Misstatement or Omission. The Prospectus when filed complied and, as amended or supplemented, if applicable, will comply in
all material respects with the Securities Act. Each of the Registration Statement, any Rule 462(b) Registration Statement,
the Prospectus and any post-effective amendments or supplements thereto, at the time it became effective or its date, as applicable,
and as of each of the Settlement Dates, if any, complied in all material respects with the Securities Act and did not and, as of
each Settlement Date, if any, did not and will not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they
were made, not misleading. The Prospectus, as amended or supplemented, as of its date, and as of each of the Settlement Dates,
if any, will not contain any 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 representations and warranties
set forth in the two immediately preceding sentences do not apply to statements in or omissions from the Registration Statement,
any Rule 462(b) Registration Statement, or any post-effective amendment thereto, or the Prospectus, or any amendments or supplements
thereto, or any free writing prospectus (as defined in Rule 405 under the Securities Act) made in reliance upon and in conformity
with information relating to HCW furnished to the Company in writing by HCW expressly for use therein. There are no contracts or
other documents required to be described in the Prospectus or to be filed as exhibits to the Registration Statement which have
not been described or filed as required.

 

    

     

    

(c) Not
an Ineligible Issuer. The Company currently is not an “ineligible issuer,” as defined in Rule 405 of the rules
and regulation of the Commission. The Company agrees to notify HCW promptly upon the Company becoming an “ineligible issuer.”

 

(d) Distribution
of Offering Material By the Company. The Company has not distributed and will not distribute, prior to the completion of HCW’s
distribution of the Placement Shares, any offering material in connection with the offering and sale of the Placement Shares other
than the Prospectus or the Registration Statement or any free writing prospectus approved in advance by the Company and HCW in
its capacity as principal or agent hereunder.

 

(e) The
Sales Agreement. This Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of,
the Company, enforceable in accordance with its terms, except as rights to indemnification and contribution hereunder may be limited
by applicable law and public policy considerations and except as the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable
principles.

 

(f) S-3 Eligibility.
(i) At the time of filing the Registration Statement and (ii) at the time of the most recent amendment thereto for the purposes
of complying with Section 10(a)(3) of the Securities Act (whether such amendment was by post-effective amendment, incorporated
report filed pursuant to Section 13 or 15(d) of the Exchange Act or form of prospectus), the Company met the then applicable requirements
for use of Form S-3 under the Securities Act, including compliance with General Instruction I.B.1 of Form S-3.

 

(g) Authorization
of the Placement Shares. The Placement Shares, when issued and delivered, will be duly authorized for issuance and sale pursuant
to this Agreement and, when issued and delivered by the Company against payment therefor pursuant to this Agreement, will be validly
issued, fully paid and nonassessable.

 

(h) No
Applicable Registration or Other Similar Rights. Except as otherwise disclosed in the Prospectus, there are no persons with
registration or other similar rights to have any equity or debt securities registered for sale under the Registration Statement
or included in the offering contemplated by this Agreement, except for such rights as have been duly waived.

 

(i) No
Material Adverse Change. Except as otherwise disclosed in the Prospectus, subsequent to the respective dates as of which information
is given in the Prospectus: (i) there has been no material adverse change, or any development that could reasonably be expected
to result in a material adverse change, in the condition, financial or otherwise, or in the earnings, business, operations or prospects,
whether or not arising from transactions in the ordinary course of business, of the Company and its subsidiaries, considered as
one entity (any such change is called a “Material Adverse Change”); (ii) the Company and its subsidiaries,
considered as one entity, have not incurred any material liability or obligation, indirect, direct or contingent, not in the ordinary
course of business nor entered into any material transaction or agreement not in the ordinary course of business; and (iii) there
has been no dividend or distribution of any kind declared, paid or made by the Company or, except for regular quarterly dividends
publicly announced by the Company or dividends paid to the Company or other subsidiaries, by any of its subsidiaries on any class
of capital stock or repurchase or redemption by the Company or any of its subsidiaries of any class of capital stock.

 

    

     

    

(j) Independent
Accountants. Ernst & Young LLP, who has expressed its opinion with respect to the financial statements (which term as used
in this Agreement includes the related notes thereto) and supporting schedules filed with the Commission or incorporated by reference
as a part of the Registration Statement and included in the Prospectus, is an independent registered public accounting firm as
required by the Securities Act and the Exchange Act.

 

(k) Preparation
of the Financial Statements. The financial statements filed with the Commission as a part of or incorporated by reference in
the Registration Statement and included in the Prospectus present fairly, in all material respects, the consolidated financial
position of the Company and its subsidiaries as of and at the dates indicated and the results of their operations and cash flows
for the periods specified. The supporting schedules included in or incorporated in the Registration Statement present fairly in
all material respects the information required to be stated therein. Such financial statements and supporting schedules have been
prepared in accordance with generally accepted accounting principles as applied in the United States applied on a consistent basis
throughout the periods involved, except as may be expressly stated in the related notes thereto. No other financial statements
or supporting schedules are required to be included in or incorporated in the Registration Statement.

 

(l) XBRL.
The interactive data in eXtensible Business Reporting Language included or incorporated by reference in the Registration Statement
fairly presents the information called for in all material respects and has been prepared in accordance with the Commission’s
rules and guidelines applicable thereto.

 

(m) Incorporation
and Good Standing of the Company and its Subsidiaries. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the British Columbia Business Corporations Act and has corporate power and authority
to own, lease and operate its properties and to conduct its business as described in the Prospectus and to enter into and perform
its obligations under this Agreement. Each subsidiary of the Company has been duly organized and is validly existing as a corporation
in good standing under the laws of the jurisdiction of its organization and has the requisite power and authority to own, lease
and operate its properties and to conduct its business as described in the Prospectus. Each of the Company and the subsidiaries
is duly qualified as a foreign corporation or foreign partnership to transact business and is in good standing in each jurisdiction
in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business,
except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Change. Except as described in the Prospectus, all of the issued and outstanding
equity interests of the subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable and are owned
by the Company free and clear of any security interest, mortgage, pledge, lien, encumbrance or adverse claim. The Company does
not own or control, directly or indirectly, any corporation, association or other entity other than the subsidiaries listed in
Exhibit 21.1 to the Company’s Annual Report on Form 10-K for the most recently ended fiscal year and other than
(i) those subsidiaries not required to be listed on Exhibit 21.1 by Item 601 of Regulation S-K under the Exchange
Act and (ii) those subsidiaries formed since the last day of the most recently ended fiscal year.

 

    

     

    

(n) Capital
Stock Matters. The Common Stock conforms in all material respects to the description thereof contained in the Prospectus. All
of the issued and outstanding shares of Common Stock have been duly authorized and validly issued, are fully paid and nonassessable
and have been issued in compliance with federal and state securities laws. None of the outstanding shares of Common Stock were
issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities
of the Company. There are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights
to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any capital stock of the Company
or any of its subsidiaries other than those accurately described in all material respects in the Prospectus. The description of
the Company’s stock option, stock bonus and other stock plans or arrangements, and the options or other rights granted thereunder,
set forth in the Prospectus accurately and fairly presents in all material respects the information required to be shown with respect
to such plans, arrangements, options and rights.

 

(o) Non-Contravention
of Existing Instruments; No Further Authorizations or Approvals Required. Neither the Company nor any of its subsidiaries is
in violation of its charter or by-laws or is in default (or, with the giving of notice or lapse of time, would be in default) (“Default”)
under any indenture, mortgage, loan or credit agreement, note, contract, franchise, lease or other instrument to which the Company
or any of its subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of
the Company or any of its subsidiaries is subject (each, an “Existing Instrument”), except for such Defaults
as would not, individually or in the aggregate, result in a Material Adverse Change. The Company’s execution, delivery and
performance of this Agreement and consummation of the transactions contemplated hereby and by the Prospectus (i) have been
duly authorized by all necessary corporate action and will not result in any violation of the provisions of the charter or by-laws
of the Company or any subsidiary, (ii) will not conflict with or constitute a breach of, or Default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries
pursuant to, or require the consent of any other party to, any Existing Instrument, except for such conflicts, breaches, Defaults,
liens, charges or encumbrances as would not, individually or in the aggregate, result in a Material Adverse Change and (iii) will
not result in any violation of any law, administrative regulation or administrative or court decree applicable to the Company or
any subsidiary, except, with respect to (iii) above, for such violations as would not, individually or in the aggregate, result
in a Material Adverse Change. No consent, approval, authorization or other order of, or registration or filing with, any court
or other governmental or regulatory authority or agency, is required for the Company’s execution, delivery and performance
of this Agreement and consummation of the transactions contemplated hereby and by the Prospectus, except such as have been obtained
or made by the Company and are in full force and effect under the Securities Act, or that may be required under applicable state
securities or blue sky laws and from the Financial Industry Regulatory Authority (“FINRA”) or Exchange.

 

    

     

    

(p) No
Material Actions or Proceedings. Except as disclosed in the Prospectus, there are no legal or governmental actions, suits or
proceedings pending or, to the best of the Company’s knowledge, threatened (i) against or affecting the Company or any
of its subsidiaries, (ii) which has as the subject thereof any officer or director of, or property owned or leased by, the
Company or any of its subsidiaries or (iii) relating to environmental or discrimination matters, where in any such case (A) there
is a reasonable possibility that such action, suit or proceeding might be determined adversely to the Company or such subsidiary
and (B) any such action, suit or proceeding, if so determined adversely, would result in a Material Adverse Change or adversely
affect the consummation of the transactions contemplated by this Agreement. No material labor dispute with the employees of the
Company or any of its subsidiaries exists or, to the Company’s knowledge, is threatened or imminent.

 

(q) All
Necessary Permits, etc. The Company and each subsidiary possess such valid and current certificates, authorizations or permits
issued by the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct their respective businesses
as currently conducted and described in the Prospectus, other than those the failure to possess or own would not result in a Material
Adverse Change, and neither the Company nor any subsidiary has received any notice of proceedings relating to the revocation or
modification of, or non-compliance with, any such certificate, authorization or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, could result in a Material Adverse Change.

 

(r) Tax
Law Compliance. Subject to any permitted extensions, the Company and its consolidated subsidiaries have filed all necessary
federal, state and foreign income, property and franchise tax returns (or have properly requested extensions thereof) and have
paid all taxes required to be paid by any of them and, if due and payable, any related or similar assessment, fine or penalty levied
against any of them except as may be being contested in good faith and by appropriate proceedings. The Company has made adequate
charges, accruals and reserves in the applicable financial statements referred to in Section 1 (i) above in respect of all
federal, state and foreign income, property and franchise taxes for all periods as to which the tax liability of the Company or
any of its consolidated subsidiaries has not been finally determined.

 

(s) Company
Not an “Investment Company”. The Company has been advised of the rules and requirements under the Investment Company
Act of 1940, as amended (the “Investment Company Act”). The Company is not, and after receipt of payment
for the Placement Shares will not be, an “investment company” within the meaning of Investment Company Act.

 

(t) Insurance.
Except as otherwise described in the Prospectus, each of the Company and its subsidiaries are insured by insurers of recognized
financial responsibility with policies in such amounts and with such deductibles and covering such risks as are generally deemed
prudent and customary for their respective businesses as currently conducted and described in the Prospectus. The Company has no
reason to believe that it or any subsidiary will not be able (i) to renew its existing insurance coverage as and when such
policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct
its business as now conducted and at a cost that would not result in a Material Adverse Change.

 

    

     

    

(u) No
Price Stabilization or Manipulation. The Company has not taken and will not take, directly or indirectly, any action designed
to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Placement Shares.

 

(v) Related
Party Transactions. There are no business relationships or related-party transactions involving the Company or any subsidiary
or any other person required to be described in the Prospectus which have not been described as required.

 

(w) Exchange
Act Compliance. The documents incorporated or deemed to be incorporated by reference in the Prospectus, at the time they were
or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the Exchange
Act, and, when read together with the other information in the Prospectus, at the Settlement Dates, will not contain an untrue
statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the fact required
to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made,
not misleading.

 

(x) No
Unlawful Contributions or Other Payments. Neither the Company nor any of its subsidiaries nor, to the Company’s knowledge,
any director, officer, employee or agent of the Company or any subsidiary acting on behalf of the Company or any of its subsidiaries
has  taken any action, directly or indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices
Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”), including, without limitation,
making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise
to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of
anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or
official thereof or any candidate for foreign political office, in contravention of the FCPA and the Company and, to the knowledge
of the Company, its controlled affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintain
policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith.

 

(y) Compliance
with Money Laundering Laws. The operations of the Company and its subsidiaries are and have been conducted at all times in
compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting
Act of 1970, as amended, the money laundering statutes of all jurisdictions to which the Company or its subsidiaries are subject,
the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced
by any governmental agency having jurisdiction over the Company or its subsidiaries (collectively, the “Money Laundering
Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any
arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, the knowledge
of the Company, threatened.

 

    

     

    

(z) Compliance
with OFAC. None of the Company, any of its subsidiaries or, to the knowledge of the Company, any director, officer, agent,
employee or affiliate of the Company or any of its subsidiaries is currently subject to any U.S. sanctions administered by the
Office of Foreign Office Control of the U.S. Department of the Treasury (“OFAC”); and the Company will
not, directly or indirectly, use the proceeds of the offering of the Placement Shares hereunder, or lend, contribute or otherwise
make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the
activities of any person currently subject to any U.S. sanctions administered by OFAC.

 

(aa) Company’s
Accounting System. The Company maintains a system of “internal control over financial reporting” (as such term
is defined in Rule 13a-15(f) of the General Rules and Regulations under the Exchange Act (the “Exchange Act Rules”))
that complies with the requirements of the Exchange Act and has been designed by its principal executive and principal financial
officers, or under their supervision, to provide reasonable assurances 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 U.S. GAAP and to maintain accountability for assets; (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 existing
assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as described in the Prospectus,
since the end of the Company’s most recent audited fiscal year, there has been (A) no material weakness in the Company’s
internal control over financial reporting (whether or not remediated) and (B) no change in the Company’s internal control
over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.

 

(bb) Disclosure
Controls. The Company maintains disclosure controls and procedures (as such is defined in Rule 13a-15(e) of the Exchange Act
Rules) that comply with the requirements of the Exchange Act; such disclosure controls and procedures have been designed to ensure
that information required to be disclosed by the Company in reports that 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, including controls
and procedures designed to ensure that such information is accumulated and communicated to the Company’s management to allow
timely decisions regarding disclosures. To the extent required by the Exchange Act Rules, the Company has conducted evaluations
of the effectiveness of its disclosure controls as required by Rule 13a-15 of the Exchange Act.

 

(cc) Compliance
with Environmental Laws. Except as otherwise described in the Prospectus, and except as would not, individually or in the aggregate,
result in a Material Adverse Change (i) neither the Company nor any of its subsidiaries is in violation of any federal, state,
local or foreign law or regulation relating to pollution or protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including without limitation, laws and
regulations relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes,
toxic substances, hazardous substances, petroleum and petroleum products (collectively, “Materials of Environmental
Concern”), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern (collectively, “Environmental Laws”), which
violation includes, but is not limited to, noncompliance with any permits or other governmental authorizations required for the
operation of the business of the Company or its subsidiaries under applicable Environmental Laws, or noncompliance with the terms
and conditions thereof, nor has the Company or any of its subsidiaries received any written communication, whether from a governmental
authority, citizens group, employee or otherwise, that alleges that the Company or any of its subsidiaries is in violation of any
Environmental Law; (ii) there is no claim, action or cause of action filed with a court or governmental authority, no investigation
with respect to which the Company has received written notice, and no written notice by any person or entity alleging potential
liability for investigatory costs, cleanup costs, governmental responses costs, natural resources damages, property damages, personal
injuries, attorneys’ fees or penalties arising out of, based on or resulting from the presence, or release into the environment,
of any Material of Environmental Concern at any location owned, leased or operated by the Company or any of its subsidiaries, now
or in the past (collectively, “Environmental Claims”), pending or, to the Company’s knowledge,
threatened against the Company or any of its subsidiaries or any person or entity whose liability for any Environmental Claim the
Company or any of its subsidiaries has retained or assumed either contractually or by operation of law; and (iii) to the best
of the Company’s knowledge, there are no past or present actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission, discharge, presence or disposal of any Material of Environmental Concern,
that reasonably could result in a violation of any Environmental Law or form the basis of a potential Environmental Claim against
the Company or any of its subsidiaries or against any person or entity whose liability for any Environmental Claim the Company
or any of its subsidiaries has retained or assumed either contractually or by operation of law.

 

    

     

    

(dd)  Intellectual
Property. Except for specific matters described in the Prospectus, the Company and its subsidiaries own, possess or have sufficient
rights to use all trademarks, trade names, patent rights, copyrights, domain names, licenses, approvals, trade secrets, inventions,
technology, know-how and other intellectual property and similar rights, including registrations and applications for registration
thereof (collectively, “Intellectual Property Rights”) necessary or material to the conduct of the business
now conducted or proposed in the Prospectus to be conducted by them. Except as disclosed in the Prospectus (i) there are no rights
of third parties to any of the Intellectual Property Rights owned or purported to be owned by the Company or its subsidiaries;
(ii) to the Company’s knowledge there is no infringement, misappropriation, breach, or default by any third party of any
of the Intellectual Property Rights of the Company or any of its subsidiaries; (iii) there is no pending or, to the Company’s
knowledge, threatened action, suit, proceeding or claim by any third party challenging the Company’s or any of its subsidiaries’
rights in or to, or the violation of any of the terms of, any of their Intellectual Property Rights; (iv) there is no pending or,
to the Company’s knowledge, threatened action, suit, proceeding or claim by any third party challenging the validity, enforceability
or scope of any Intellectual Property Rights of the Company or any of its subsidiaries; (v) there is no pending or, to the Company’s
knowledge, threatened action, suit, proceeding or claim by any third party that the Company or any of its subsidiaries infringes,
misappropriates or otherwise violates or conflicts with any Intellectual Property Rights of any third party; (vi) none of the Intellectual
Property Rights used or held for use by the Company or any of its subsidiaries in their businesses has been obtained or is being
used or held for use by the Company or any of its subsidiaries in violation of any contractual obligation binding on the Company
or any of its subsidiaries, and (vii) the Company and its subsidiaries have taken reasonable steps in accordance with normal industry
practice to maintain the confidentiality of all Intellectual Property Rights the value of which to the Company or any subsidiary
is contingent upon maintaining the confidentiality thereof, except in each case covered by clauses (i) – (vii) such as would
not, if determined adversely to the Company or any of its subsidiaries, individually or in the aggregate, result in a Material
Adverse Change.

 

    

     

    

(ee) Compliance
with Applicable Laws. The Company and its subsidiaries: (A) are and at all times have been in material compliance with all
statutes, rules and regulations applicable to the ownership, testing, development, manufacture, packaging, processing, use, distribution,
marketing, labeling, promotion, sale, offer for sale, storage, import, export or disposal of any product under development, manufactured
or distributed by the Company or the Subsidiaries (“Applicable Laws”), (b) have not received any Form
483 from the FDA, notice of adverse finding, warning letter, or other written correspondence or notice from the FDA, the European
Medicines Agency (the “EMA”), or any other federal, state, local or foreign governmental or regulatory
authority alleging or asserting material noncompliance with any Applicable Laws or any licenses, certificates, approvals, clearances,
authorizations, permits and supplements or amendments thereto required by any such Applicable Laws (“Authorizations”),
which would, individually or in the aggregate, result in a Material Adverse Change; (C) possess all material Authorizations and
such Authorizations are valid and in full force and effect and neither the Company nor the Subsidiaries is in material violation
of any term of any such Authorizations; (D) have not received written notice of any claim, action, suit, proceeding, hearing, enforcement,
investigation, arbitration or other action from the FDA, the EMA, or any other federal, state, local or foreign governmental or
regulatory authority or third party alleging that any Company product, operation or activity is in material violation of any Applicable
Laws or Authorizations and has no knowledge that the FDA, the EMA, or any other federal, state, local or foreign governmental or
regulatory authority or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding
against the Company; (E) have not received notice that the FDA, EMA, or any other federal, state, local or foreign governmental
or regulatory authority has taken, is taking or intends to take action to limit, suspend, modify or revoke any material Authorizations
and has no knowledge that the FDA, EMA, or any other federal, state, local or foreign governmental or regulatory authority is considering
such action; and (F) have filed, obtained, maintained or submitted all reports, documents, forms, notices, applications, records,
claims, submissions and supplements or amendments as required by any Applicable Laws or Authorizations except where the failure
to file such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments would
not result in a Material Adverse Change, and that all such reports, documents, forms, notices, applications, records, claims, submissions
and supplements or amendments were materially complete and correct on the date filed (or were corrected or supplemented by a subsequent
submission).

 

(ff) Clinical
Studies. All animal and other preclinical studies and clinical trials conducted by the Company or on behalf of the Company
were, and, if still pending are, to the Company’s knowledge, being conducted in all material respects in compliance with
all Applicable Laws and in accordance with experimental protocols, procedures and controls generally used by qualified experts
in the preclinical study and clinical trials of new drugs and biologics as applied to comparable products to those being developed
by the Company; the descriptions of the results of such preclinical studies and clinical trials contained in the Registration Statement
and the Prospectus are accurate in all material respects, and, except as set forth in the Registration Statement and the Prospectus,
the Company has no knowledge of any other clinical trials or preclinical studies, the results of which reasonably call into question
the clinical trial or preclinical study results described or referred to in the Registration Statement and the Prospectus when
viewed in the context in which such results are described; and the Company has not received any written notices or correspondence
from the FDA, the EMA, or any other domestic or foreign governmental agency requiring the termination or suspension of any preclinical
studies or clinical trials conducted by or on behalf of the Company that are described in the Registration Statement and the Prospectus
or the results of which are referred to in the Registration Statement and the Prospectus.

 

    

     

    

(gg) Compliance
Program. The Company has established and administers a compliance program applicable to the Company, to assist the Company
and the directors, officers and employees of the Company in complying with applicable regulatory guidelines (including, without
limitation, those administered by the FDA, the EMA, and any other foreign, federal, state or local governmental or regulatory authority
performing functions similar to those performed by the FDA or EMA); except where such noncompliance would not reasonably be expected
to result in a Material Adverse Change.

 

(hh) Listing.
The Company is subject to and in compliance in all material respects with the reporting requirements of Section 13 or Section 15(d)
of the Exchange Act. The Common Stock is registered pursuant to Section 12(b) or Section 12(g) of the Exchange Act and is listed
on Exchange, and the Company has taken no action designed to, or reasonably likely to have the effect of, terminating the registration
of the Common Stock under the Exchange Act or delisting the Common Stock from Exchange, nor has the Company received any notification
that the Commission or Exchange is contemplating terminating such registration or listing.

 

(ii) Brokers.
Except for HCW, there is no broker, finder or other party that is entitled to receive from the Company any brokerage or finder’s
fee or other fee or commission as a result of any transactions contemplated by this Agreement.

 

(jj) No
Outstanding Loans or Other Indebtedness. Except as described in the Prospectus, there are no outstanding loans, advances (except
normal advances for business expenses in the ordinary course of business) or guarantees or indebtedness by the Company to or for
the benefit of any of the officers or directors of the Company or any of the immediate family members of any of them.

 

(kk) No Reliance.
The Company has not relied upon HCW or legal counsel for HCW for any legal, tax or accounting advice in connection with the offering
and sale of the Placement Shares.

 

(ll) HCW Purchases.
The Company acknowledges and agrees that HCW has informed the Company that HCW may, to the extent permitted under the Securities
Act, the Exchange Act and this Agreement, purchase and sell shares of Common Stock for its own account while this Agreement is
in effect.

 

Any certificate signed by an officer of the Company and delivered
to HCW or to counsel for HCW in connection with this Agreement shall be deemed to be a representation and warranty by the Company
to HCW as to the matters set forth therein.

 

    

     

    

The Company acknowledges that HCW and, for purposes of the opinions
to be delivered pursuant to Section 7 hereof, counsel to the Company and counsel to HCW, will rely upon the accuracy and
truthfulness of the foregoing representations and hereby consents to such reliance.

 

7.               
Covenants of the Company. The Company covenants and agrees with HCW that:

 

(a) Registration
Statement Amendments. After the date of this Agreement and during any period in which a Prospectus relating to any Placement
Shares is required to be delivered by HCW under the Securities Act (including in circumstances where such requirement may be satisfied
pursuant to Rule 172 under the Securities Act), (i) the Company will notify HCW promptly of the time when any subsequent amendment
to the Registration Statement, other than documents incorporated by reference or amendments not related to any Placement Shares,
has been filed with the Commission and/or has become effective or any subsequent supplement to the Prospectus has been filed and
of any request by the Commission for any amendment or supplement to the Registration Statement or Prospectus related to any Placement
Shares or for additional information related to any Placement Shares, (ii) the Company will prepare and file with the Commission,
promptly upon HCW’s reasonable request, any amendments or supplements to the Registration Statement or Prospectus that, in
HCW’s reasonable opinion, may be necessary or advisable in connection with the distribution of the Placement Shares by HCW
(provided, however, that the failure of HCW to make such request shall not relieve the Company of any obligation or liability
hereunder, or affect HCW’s right to rely on the representations and warranties made by the Company in this Agreement and
provided, further, that the only remedy HCW shall have with respect to the failure to make such filing shall be to cease making
sales under this Agreement until such amendment or supplement is filed); (iii) the Company will not file any amendment or supplement
to the Registration Statement or Prospectus, other than documents incorporated by reference, relating to the Placement Shares or
a security convertible into the Placement Shares unless a copy thereof has been submitted to HCW within a reasonable period of
time before the filing and HCW has not reasonably objected thereto (provided, however, that (A) the failure of HCW to make
such objection shall not relieve the Company of any obligation or liability hereunder, or affect HCW’s right to rely on the
representations and warranties made by the Company in this Agreement, (B) the Company has no obligation to provide HCW any advance
copy of such filing or to provide HCW an opportunity to object to such filing if the filing does not name HCW or does not relate
to the transaction herein provided, and (C) the only remedy HCW shall have with respect to the failure by the Company to provide
HCW with such copy or the filing of such amendment or supplement despite HCW’s objection shall be to cease making sales under
this Agreement) and the Company will furnish to HCW at the time of filing thereof a copy of any document that upon filing is deemed
to be incorporated by reference into the Registration Statement or Prospectus, except for those documents available via EDGAR;
and (iv) the Company will cause each amendment or supplement to the Prospectus, other than documents incorporated by reference,
to be filed with the Commission as required pursuant to the applicable paragraph of Rule 424(b) of the Securities Act.

 

(b) Notice
of Commission Stop Orders. The Company will advise HCW, promptly after it receives notice or obtains knowledge thereof, of
the issuance or threatened issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement,
of the suspension of the qualification of the Placement Shares for offering or sale in any jurisdiction, or of the initiation or
threatening of any proceeding for any such purpose; and it will promptly use its commercially reasonable efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such a stop order should be issued.

 

    

     

    

(c) Delivery
of Prospectus; Subsequent Changes. During any period in which a Prospectus relating to the Placement Shares is required to
be delivered by HCW under the Securities Act with respect to a pending sale of the Placement Shares, (including in circumstances
where such requirement may be satisfied pursuant to Rule 172 under the Securities Act), the Company will use its commercially reasonable
efforts to comply with all requirements imposed upon it by the Securities Act, as from time to time in force, and to file on or
before their respective due dates (taking into account any extensions available under the Exchange Act) all reports and any definitive
proxy or information statements required to be filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14,
15(d) or any other provision of or under the Exchange Act. If during such period any event occurs as a result of which the Prospectus
as then amended or supplemented would include an untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances then existing, not misleading, or if during such period it is
necessary to amend or supplement the Registration Statement or Prospectus to comply with the Securities Act, the Company will promptly
notify HCW to suspend the offering of Placement Shares during such period and the Company will promptly amend or supplement the
Registration Statement or Prospectus (at the expense of the Company) so as to correct such statement or omission or effect such
compliance.

 

(d) Listing
of Placement Shares. During any period in which the Prospectus relating to the Placement Shares is required to be delivered
by HCW under the Securities Act with respect to a pending sale of the Placement Shares (including in circumstances where such requirement
may be satisfied pursuant to Rule 172 under the Securities Act), the Company will use its commercially reasonable efforts to cause
the Placement Shares to be listed on Exchange and to qualify the Placement Shares for sale under the securities laws of such jurisdictions
as HCW reasonably designates and to continue such qualifications in effect so long as required for the distribution of the Placement
Shares; provided, however, that the Company shall not be required in connection therewith to qualify as a foreign corporation
or dealer in securities or file a general consent to service of process in any jurisdiction.

 

(e) Delivery
of Registration Statement and Prospectus. The Company will furnish to HCW and its counsel (at the expense of the Company) copies
of the Registration Statement, the Prospectus (including all documents incorporated by reference therein) and all amendments and
supplements to the Registration Statement or Prospectus that are filed with the Commission during any period in which a Prospectus
relating to the Placement Shares is required to be delivered under the Securities Act (including all documents filed with the Commission
during such period that are deemed to be incorporated by reference therein), in each case as soon as reasonably practicable and
in such quantities as HCW may from time to time reasonably request and, at HCW’s request, will also furnish copies of the
Prospectus to each exchange or market on which sales of the Placement Shares may be made; provided, however, that the Company
shall not be required to furnish any document (other than the Prospectus) to HCW to the extent such document is available on EDGAR.

 

(f) Earnings
Statement. The Company will make generally available to its security holders as soon as practicable, but in any event not later
than 15 months after the end of the Company’s current fiscal quarter, an earnings statement covering a 12-month period that
satisfies the provisions of Section 11(a) and Rule 158 of the Securities Act.

 

    

     

    

(g) Expenses.
The Company, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, in accordance
with the provisions of Section 11 hereunder, will pay all expenses incident to the performance of its obligations under this Agreement,
including (i) the preparation, filing, including any fees required by the Commission, and printing of the Registration Statement
(including financial statements and exhibits) as originally filed and of each amendment and supplement thereto and each free writing
prospectus, in such number as HCW shall deem reasonably necessary, (ii) the printing and delivery to HCW of this Agreement and
such other documents as may be required in connection with the offering, purchase, sale, issuance or delivery of the Placement
Shares, (iii) the preparation, issuance and delivery of the certificates, if any, for the Placement Shares to HCW, including any
stock or other transfer taxes and any capital duties, stamp duties or other duties or taxes payable upon the sale, issuance or
delivery of the Placement Shares to HCW, (iv) the fees and disbursements of the counsel, accountants and other advisors to the
Company, (v) the fees and disbursements of counsel to HCW up to $50,000; (vi) the fees and expenses of the transfer agent and registrar
for the Common Stock, (vii) the filing fees incident to any review by FINRA of the terms of the sale of the Placement Shares, (viii)
the fees and expenses incurred in connection with the listing of the Placement Shares on Exchange, and (ix) all trading, execution,
settlement, or wiring fees incurred by HCW in connection with the sale of the Placement Shares.

 

(h) Use of
Proceeds. The Company will use the Net Proceeds as described in the Prospectus in the section entitled “Use of Proceeds.”

 

(i) Notice
of Other Sales. During the pendency of any Placement Notice given hereunder, and for 5 Trading Days following the termination
of any Placement Notice given hereunder, the Company shall provide HCW notice as promptly as reasonably possible before it offers
to sell, contracts to sell, sells, grants any option to sell or otherwise disposes of any shares of Common Stock (other than Placement
Shares offered pursuant to the provisions of this Agreement) or securities convertible into or exchangeable for Common Stock, warrants
or any rights to purchase or acquire Common Stock; provided, that such notice shall not be required in connection with the
(i) issuance, grant or sale of Common Stock, options to purchase shares of Common Stock or any other equity awards, or Common Stock
issuable upon the exercise of options or other equity awards pursuant to any stock option, stock bonus, employee stock purchase
or other stock plan or arrangement described in the Prospectus, (ii) the issuance, grant or sale of Common Stock, or securities
convertible into or exercisable for Common Stock, in connection with any joint venture, commercial, strategic or collaborative
relationship, or the acquisition or license by the Company of the securities, businesses, property or other assets of another person
or entity, (iii) the issuance or sale of Common Stock pursuant to any dividend reinvestment plan that the Company may adopt from
time to time provided the implementation of such is disclosed to HCW in advance or (iv) any shares of Common Stock issuable upon
the exchange, conversion or redemption of securities or the exercise or vesting of warrants, options or other rights in effect
or outstanding. Notwithstanding the foregoing provisions, nothing herein shall be construed to restrict the Company’s ability,
or require the Company to provide notice to HCW, to file a registration statement under the Securities Act.

 

    

     

    

(j) Change
of Circumstances. The Company will, at any time during a fiscal quarter in which the Company intends to tender a Placement
Notice or sell Placement Shares, advise HCW promptly after it shall have received notice or obtained knowledge thereof, of any
information or fact that would alter or affect in any material respect any opinion, certificate, letter or other document provided
to HCW pursuant to this Agreement.

 

(k) Due
Diligence Cooperation. During the term of this Agreement, the Company will cooperate with any reasonable due diligence review
conducted by HCW or its agents in connection with the transactions contemplated hereby, including, without limitation, providing
information and making available documents and senior corporate officers, during regular business hours and at the Company’s
principal offices, as HCW may reasonably request.

 

(l) Required
Filings Relating to Placement of Placement Shares. To the extent that the filing of a prospectus supplement with the Commission
with respect to a placement of Placement Shares is required under Rule 424(b) under the Securities Act, the Company agrees that
on or before such dates as the Securities Act shall require, the Company will (i) file a prospectus supplement with the Commission
under the applicable paragraph of Rule 424(b) under the Securities Act (each and every filing under Rule 424(b), a “Filing
Date”), which prospectus supplement will set forth, to the extent required, within the relevant period, the amount
of Placement Shares sold through HCW, the Net Proceeds to the Company and the compensation payable by the Company to HCW with respect
to such Placement Shares (provided that the Company may satisfy its obligations under this Section 7(l)(i) by effecting a filing
in accordance with the Exchange Act with respect to such information), and (ii) deliver such number of copies of each such prospectus
supplement to each exchange or market on which such sales were effected as may be required by the rules or regulations of such
exchange or market.

 

(m) Representation
Dates; Certificate. On or prior to the First Delivery Date and each time the Company (i) amends or supplements the Registration
Statement or the Prospectus relating to the Placement Shares (other than a prospectus supplement filed in accordance with Section
7(l) of this Agreement) by means of a post-effective amendment, sticker, or supplement but not by means of incorporation of document(s)
by reference to the Registration Statement or the Prospectus relating to the Placement Shares; (ii) files an annual report on Form
10-K under the Exchange Act; (iii) files its quarterly reports on Form 10-Q under the Exchange Act; or (iv) files a current report
on Form 8-K under the Exchange Act containing amended audited financial information (other than information “furnished”
pursuant to Items 2.02 or 7.01 of Form 8-K or to provide disclosure pursuant to Item 8.01 of Form 8-K relating to the reclassification
of certain properties as discontinued operations in accordance with Statement of Financial Accounting Standards No. 144 under the
Exchange Act) under the Exchange Act (each date of filing of one or more of the documents referred to in clauses (i) through (iv)
shall be a “Representation Date”); the Company shall furnish HCW with a certificate, in the form attached
hereto as Exhibit 7(m) within five (5) Trading Days of any Representation Date if requested by HCW. The requirement to provide
a certificate under this Section 7(m) shall be automatically waived for any Representation Date occurring at a time at which no
Placement Notice is pending, which waiver shall continue until the earlier to occur of the date the Company delivers a Placement
Notice hereunder (which for such calendar quarter shall be considered a Representation Date, including for purposes of Sections
7(n) and 7(o) hereof) and the next occurring Representation Date; provided, however, that such waiver shall not apply
for any Representation Date on which the Company files its annual report on Form 10-K. Notwithstanding the foregoing, if the Company
subsequently decides to sell Placement Shares following a Representation Date when the Company relied on such waiver and did not
provide HCW with a certificate under this Section 7(m), then before the Company delivers the Placement Notice or HCW sells
any Placement Shares, the Company shall provide HCW with a certificate, in the form attached hereto as Exhibit 7(m), dated
the date of the Placement Notice.

 

    

     

    

(n) Legal
Opinion. (i) On or prior to the First Delivery Date, the Company shall cause to be furnished to HCW a written opinion
and negative assurance letter of Bryan Cave LLP (“BC”) and a written opinion of Stikeman Elliott LLP,
or other counsel reasonably satisfactory to HCW (collectively, “Company Counsel”), in form and substance
reasonably satisfactory to HCW and its counsel, dated the date that such opinion and negative assurance letter, as applicable,
are required to be delivered and (ii) within the later of (A) five (5) Trading Days of each Representation Date with respect
to which the Company is obligated to deliver a certificate in the form attached hereto as Exhibit 7(m), and (B) the date
a Placement Notice is first delivered by the Company following a Representation Date, the Company shall cause to be furnished to
HCW a negative assurance letter of BC, in form and substance reasonably satisfactory to HCW and its counsel, dated the date that
the negative assurance letter is required to be delivered (the “Opinion Date”), substantially similar
to the forms attached hereto as Exhibit 7(n)(i) (solely with respect to the opinion and negative assurance letter to be
delivered on or prior to the First Delivery Date) and Exhibit 7(n)(ii) (for negative assurance letters to be delivered in
connection with all subsequent Representation Dates), respectively, modified, as necessary, to relate to the Registration Statement
and the Prospectus as then amended or supplemented; provided, however, that BC shall be required to furnish to HCW
no more than one negative assurance letter per calendar quarter, and provided further, that in lieu of such negative assurance
letters for subsequent Representation Dates, BC may furnish HCW with a letter (a “Reliance Letter”) to
the effect that HCW may rely on a prior negative assurance letter delivered under this Section 7(n) to the same extent as
if it were dated the date of such Reliance Letter (except that statements in such prior negative assurance letter shall be deemed
to relate to the Registration Statement and the Prospectus as amended or supplemented at such Representation Date).

 

(o) Comfort
Letter. On or prior to the First Delivery Date and within five (5) Trading Days of each subsequent Representation Date with
respect to which the Company is obligated to deliver a certificate in the form attached hereto as Exhibit 7(m), other than
pursuant to Section 7(m)(iii), the Company shall cause its independent accountants to furnish HCW letters (the “Comfort
Letters”), dated the date the Comfort Letter is delivered, in form and substance satisfactory to HCW, (i) confirming
that they are an independent registered public accounting firm within the meaning of the Securities Act and the PCAOB, (ii) stating,
as of such date, the conclusions and findings of such firm with respect to the financial information and other matters ordinarily
covered by accountants’ “comfort letters” to HCW in connection with registered public offerings (the first such
letter, the “Initial Comfort Letter”) and (iii) updating the Initial Comfort Letter with any information
that would have been included in the Initial Comfort Letter had it been given on such date and modified as necessary to relate
to the Registration Statement and the Prospectus, as amended and supplemented to the date of such letter.

 

(p) Market
Activities. The Company will not, directly or indirectly, (i) take any action designed to cause or result in, or that constitutes
or might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Placement Shares or (ii) sell, bid for, or purchase the Placement Shares to be issued and
sold pursuant to this Agreement, or pay anyone any compensation for soliciting purchases of the Placement Shares other than HCW;
provided, however, that the Company may bid for and purchase shares of its Common Stock in accordance with Rule 10b-18 under the
Exchange Act.

 

    

     

    

(q) Insurance.
The Company and its subsidiaries shall maintain, or cause to be maintained, insurance in such amounts and covering such risks as
is reasonable and customary for the business for which it is engaged.

 

(r) Compliance
with Laws. The Company and each of its subsidiaries will use commercially reasonable efforts to maintain, or cause to be maintained,
all material environmental permits, licenses and other authorizations required by federal, state and local law in order to conduct
their businesses as described in the Prospectus, and the Company and each of its subsidiaries shall conduct their businesses, or
cause their businesses to be conducted, in substantial compliance with such permits, licenses and authorizations and with applicable
environmental laws, except where the failure to maintain or be in compliance with such permits, licenses and authorizations could
not reasonably be expected to result in a Material Adverse Change.

 

(s) Investment
Company Act. The Company will conduct its affairs in such a manner so as to reasonably ensure that neither it nor its subsidiaries
will be or become, at any time prior to the termination of this Agreement, an “investment company,” as such term is
defined in the Investment Company Act, assuming no change in the Commission’s current interpretation as to entities that
are not considered an investment company.

 

(t) Securities
Act and Exchange Act. The Company will use its best efforts to comply with all requirements imposed upon it by the Securities
Act and the Exchange Act as from time to time in force, so far as necessary to permit the continuance of sales of, or dealings
in, the Placement Shares as contemplated by the provisions hereof and the Prospectus.

 

(u) No
Offer to Sell. Other than any free writing prospectus (as defined in Rule 405 under the Securities Act) approved in advance
by the Company and HCW in its capacity as principal or agent hereunder, neither HCW nor the Company (including its agents and representatives,
other than HCW in its capacity as such) will make, use, prepare, authorize, approve or refer to any written communication (as defined
in Rule 405 under the Securities Act), required to be filed with the Commission, that constitutes an offer to sell or solicitation
of an offer to buy Placement Shares hereunder.

 

(v) Sarbanes-Oxley
Act. The Company and its subsidiaries will use their best efforts to comply with all effective provisions of the Sarbanes-Oxley
Act applicable to the Company.

 

8.               
Conditions to HCW’s Obligations. The obligations of HCW hereunder with respect to a Placement will be subject
to the continuing accuracy and completeness of the representations and warranties made by the Company herein, to the due performance
by the Company of its obligations hereunder, to the completion by HCW of a due diligence review satisfactory to HCW in its reasonable
judgment, and to the continuing satisfaction (or waiver by HCW in its sole discretion) of the following additional conditions:

 

    

     

    

(a) Registration
Statement Effective. The Registration Statement shall be effective and shall be available for (i) all sales of Placement Shares
issued pursuant to all prior Placement Notices and (ii) the sale of all Placement Shares contemplated to be issued by any Placement
Notice.

 

(b) No
Material Notices. None of the following events shall have occurred and be continuing: (i) receipt by the Company or any of
its subsidiaries of any request for additional information from the Commission or any other federal or state governmental authority
during the period of effectiveness of the Registration Statement, the response to which would require any post-effective amendments
or supplements to the Registration Statement or the Prospectus, which filings or submissions have not, as of the time of a Placement,
been made and deemed effective; (ii) the issuance by the Commission or any other federal or state governmental authority of
any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose;
(iii) receipt by the Company of any notification from the Commission or any other federal or state governmental authority with
respect to the suspension of the qualification or exemption from qualification of any of the Placement Shares for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose; or (iv) the occurrence of any event that makes any material
statement made in the Registration Statement or the Prospectus or any material document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, the
related Prospectus or such documents so that, in the case of the Registration Statement, it will not contain any materially 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, in the light of the circumstances under which they were made, not misleading and, that in the case of the Prospectus,
it will not contain any materially 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, in the light of the circumstances under which they were made, not misleading.

 

(c) No
Misstatement or Material Omission. HCW shall not have advised the Company that the Registration Statement or Prospectus, or
any amendment or supplement thereto, contains an untrue statement of fact that in HCW’s reasonable opinion is material, or
omits to state a fact that in HCW’s reasonable opinion is material and is required to be stated therein or is necessary to
make the statements therein not misleading.

 

(d) Material
Changes. Except as contemplated in the Prospectus, or disclosed in the Company’s reports filed with the Commission, there
shall not have been any material adverse change, on a consolidated basis, in the authorized capital stock of the Company or any
Material Adverse Change or any development that could reasonably be expected to result in a Material Adverse Change.

 

(e) Company
Counsel Legal Opinion. HCW shall have received the opinions and negative assurance letters or Reliance Letters of Company Counsel
required to be delivered pursuant to Section 7(n) on or before the date on which such delivery of such opinion and negative
assurance letter is required pursuant to Section 7(n).

 

(f) Comfort
Letter. HCW shall have received the Comfort Letter required to be delivered pursuant to Section 7(o) on or before the
date on which such delivery of such Comfort Letter is required pursuant to Section 7(o).

 

    

     

    

(g) Representation
Certificate. HCW shall have received the certificate required to be delivered pursuant to Section 7(m) on or before
the date on which delivery of such certificate is required pursuant to Section 7(m).

 

(h) Secretary’s
Certificate. On or prior to the First Delivery Date, HCW shall have received a certificate, signed on behalf of the Company
by its corporate Secretary, in form and substance satisfactory to HCW and its counsel.

 

(i) No
Suspension. Trading in the Common Stock shall not have been suspended on Exchange.

 

(j) Other
Materials. On each date on which the Company is required to deliver a certificate pursuant to Section 7(m), the Company
shall have furnished to HCW such appropriate further information, certificates and documents as HCW may have reasonably requested.
All such opinions, certificates, letters and other documents shall have been in compliance with the provisions hereof. The Company
will furnish HCW with such conformed copies of such opinions, certificates, letters and other documents as HCW shall have reasonably
requested.

 

(k) Securities
Act Filings Made. All filings with the Commission required by Rule 424 under the Securities Act to have been filed prior to
the issuance of any Placement Notice hereunder shall have been made within the applicable time period prescribed for such filing
by Rule 424.

 

(l) Approval
for Listing. The Placement Shares shall either have been (i) approved for listing on Exchange, subject only to notice of issuance,
or (ii) the Company shall have filed an application for listing of the Placement Shares on Exchange at, or prior to, the issuance
of any Placement Notice.

 

(m) No
Termination Event. There shall not have occurred any event that would permit HCW to terminate this Agreement pursuant to Section
11(a).

 

9.               
Indemnification and Contribution.

 

(a) Company
Indemnification. The Company agrees to indemnify and hold harmless HCW, the directors, officers, partners, employees and agents
of HCW and each person, if any, who (i) controls HCW within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, or (ii) is controlled by or is under common control with HCW (a “HCW Affiliate”) from and
against any and all losses, claims, liabilities, expenses and damages (including, but not limited to, any and all reasonable investigative,
legal and other expenses incurred in connection with, and any and all amounts paid in settlement (in accordance with Section
9(c)) of, any action, suit or proceeding between any of the indemnified parties or between any indemnified party and any third
party, or otherwise, or any claim asserted), as and when incurred, to which HCW, or any such person, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, liabilities, expenses or damages arise out of or are based, directly or indirectly, on (x) any untrue statement
or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus or any amendment or supplement
to the Registration Statement or the Prospectus or in any free writing prospectus or based on written information furnished by
or on behalf of the Company filed in any jurisdiction in order to qualify the Common Stock under the securities laws thereof or
filed with the Commission, (y) the omission or alleged omission to state in any such document a material fact required to be stated
in it or necessary to make the statements in it, in the light of the circumstances under which they were made, not misleading;
provided, however, that this indemnity agreement shall not apply to the extent that such loss, claim, liability,
expense or damage arises from the sale of the Placement Shares pursuant to this Agreement and is caused directly or indirectly
by an untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information
relating to HCW and furnished to the Company in writing by HCW expressly for use therein. This indemnity agreement will be in addition
to any liability that the Company might otherwise have.

 

    

     

    

(b) HCW
Indemnification. HCW agrees to indemnify and hold harmless the Company and its directors and each officer of the Company that
signed the Registration Statement, and each person, if any, who (i) controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act or (ii) is controlled by or is under common control with the Company against
any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 9(a), as incurred,
but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement
(or any amendments thereto) or the Prospectus (or any amendment or supplement thereto) or in any free writing prospectus in reliance
upon and in conformity with information relating to HCW and furnished to the Company in writing by HCW expressly for use therein.

 

(c) Procedure.
Any party that proposes to assert the right to be indemnified under this Section 9 will, promptly after receipt of notice
of commencement of any action against such party in respect of which a claim is to be made against an indemnifying party or parties
under this Section 9, notify each such indemnifying party of the commencement of such action, enclosing a copy of all papers
served, but the omission so to notify such indemnifying party will not relieve the indemnifying party from (i) any liability that
it might have to any indemnified party otherwise than under this Section 9 and (ii) any liability that it may have to any
indemnified party under the foregoing provision of this Section 9 unless, and only to the extent that, such omission results
in the forfeiture of substantive rights or defenses by the indemnifying party. If any such action is brought against any indemnified
party and it notifies the indemnifying party of its commencement, the indemnifying party will be entitled to participate in and,
to the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement
of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of
the action, with counsel reasonably satisfactory to the indemnified party, and after notice from the indemnifying party to the
indemnified party of its election to assume the defense, the indemnifying party will not be liable to the indemnified party for
any legal or other expenses except as provided below and except for the reasonable costs of investigation subsequently incurred
by the indemnified party in connection with the defense. The indemnified party will have the right to employ its own counsel in
any such action, but the fees, expenses and other charges of such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified
party has reasonably concluded (based on advice of counsel) that there may be legal defenses available to it or other indemnified
parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict
exists (based on advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which
case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or
(4) the indemnifying party has not in fact employed counsel to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the reasonable and documented fees, disbursements and
other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party
or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable
fees, disbursements and other charges of more than one separate firm admitted to practice in such jurisdiction at any one time
for all such indemnified party or parties. All such fees, disbursements and other charges will be reimbursed by the indemnifying
party promptly as they are incurred, subject to the indemnifying party’s receipt of reasonably detailed documentation with
respect to such fees, disbursements and other charges. An indemnifying party will not, in any event, be liable for any settlement
of any action or claim effected without its written consent. No indemnifying party shall, without the prior written consent of
each indemnified party, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action
or proceeding relating to the matters contemplated by this Section 9 (whether or not any indemnified party is a party thereto),
unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising
or that may arise out of such claim, action or proceeding.

 

    

     

    

(d) Contribution.
In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 9 is applicable in accordance with its terms but for any reason is held to be unavailable from
the Company or HCW, the Company and HCW will contribute to the total losses, claims, liabilities, expenses and damages (including
any investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted, but after deducting any contribution received by the Company from persons other than
HCW, such as persons who control the Company within the meaning of the Securities Act, officers of the Company who signed the Registration
Statement and directors of the Company, who also may be liable for contribution) to which the Company and HCW may be subject in
such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and HCW on the
other. The relative benefits received by the Company on the one hand and HCW on the other hand shall be deemed to be in the same
proportion as the total Net Proceeds from the sale of the Placement Shares (before deducting expenses) received by the Company
bear to the total compensation received by HCW (before deducting expenses) from the sale of Placement Shares on behalf of the Company.
If, but only if, the allocation provided by the foregoing sentence is not permitted by applicable law, the allocation of contribution
shall be made in such proportion as is appropriate to reflect not only the relative benefits referred to in the foregoing sentence
but also the relative fault of the Company, on the one hand, and HCW, on the other, with respect to the statements or omission
that resulted in such loss, claim, liability, expense or damage, or action in respect thereof, as well as any other relevant equitable
considerations with respect to such offering. Such relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information
supplied by the Company or HCW, the intent of the parties and their relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and HCW agree that it would not be just and equitable if contributions
pursuant to this Section 9(d) were to be determined by pro rata allocation or by any other method of allocation that does
not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, liability, expense, or damage, or action in respect thereof, referred to above in this Section 9(d)
shall be deemed to include, for the purpose of this Section 9(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action or claim to the extent consistent with Section
9(c) hereof. Notwithstanding the foregoing provisions of this Section 9(d), HCW shall not be required to contribute
any amount in excess of the commissions received by it under this Agreement and no person found guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. For purposes of this Section 9(d), any person who controls a party to this Agreement
within the meaning of the Securities Act, and any officers, directors, partners, employees or agents of HCW, will have the same
rights to contribution as that party, and each officer and director of the Company who signed the Registration Statement will have
the same rights to contribution as the Company, subject in each case to the provisions hereof. Any party entitled to contribution,
promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution
may be made under this Section 9(d), will notify any such party or parties from whom contribution may be sought, but the
omission to so notify will not relieve that party or parties from whom contribution may be sought from any other obligation it
or they may have under this Section 9(d) except to the extent that the failure to so notify such other party materially
prejudiced the substantive rights or defenses of the party from whom contribution is sought. Except for a settlement entered into
pursuant to the last sentence of Section 9(c) hereof, no party will be liable for contribution with respect to any action
or claim settled without its written consent if such consent is required pursuant to Section 9(c) hereof.

 

    

     

    

10.           
Representations and Agreements to Survive Delivery. The indemnity and contribution agreements contained in Section
9 of this Agreement and all representations and warranties of the Company herein or in certificates delivered pursuant hereto
shall survive, as of their respective dates, regardless of (i) any investigation made by or on behalf of HCW, any controlling persons,
or the Company (or any of their respective officers, directors or controlling persons), (ii) delivery and acceptance of the Placement
Shares and payment therefor or (iii) any termination of this Agreement.

 

11.           
Termination.

 

(a) HCW shall
have the right by giving written notice as hereinafter specified at any time to terminate this Agreement if (i) any Material Adverse
Change, or any development that would reasonably be expected to result in a Material Adverse Change has occurred that, in the reasonable
judgment of HCW, may materially impair the ability of HCW to sell the Placement Shares hereunder, (ii) the Company shall have failed,
refused or been unable to perform any agreement on its part to be performed hereunder; provided, however, in the case of
any failure of the Company to deliver (or cause another person to deliver) any certification, opinion, or letter required under
Sections 7(m), 7(n), or 7(o), HCW’s right to terminate shall not arise unless such failure to
deliver (or cause to be delivered) continues for more than thirty (30) days from the date such delivery was required; (iii) any
other condition of HCW’s obligations hereunder is not fulfilled; or (iv) any suspension or limitation of trading in the Common
Stock or in securities generally on Exchange shall have occurred. Any such termination shall be without liability of any party
to any other party except that the provisions of Section 7(g) (Expenses), Section 9 (Indemnification and Contribution),
Section 10 (Representations and Agreements to Survive Delivery), Section 16 (Applicable Law; Consent to Jurisdiction)
and Section 17 (Waiver of Jury Trial) hereof shall remain in full force and effect notwithstanding such termination. If
HCW elects to terminate this Agreement as provided in this Section 11(a), HCW shall provide the required written notice
as specified in Section 12 (Notices).

 

    

     

    

(b) The Company
shall have the right, by giving ten (10) days’ notice as hereinafter specified to terminate this Agreement in its sole discretion
at any time after the date of this Agreement. Any such termination shall be without liability of any party to any other party except
that the provisions of Section 7(g), Section 9, Section 10, Section 16 and Section 17 hereof shall remain in full force and effect
notwithstanding such termination.

 

(c) HCW shall
have the right, by giving ten (10) days’ notice as hereinafter specified to terminate this Agreement in its sole discretion
at any time after the date of this Agreement. Any such termination shall be without liability of any party to any other
party except that the provisions of Section 7(g), Section 9, Section 10, Section 16 and Section 17 hereof shall remain in full
force and effect notwithstanding such termination.

 

(d) Unless
earlier terminated pursuant to this Section 11, this Agreement shall automatically terminate upon the issuance and sale
of all of the Placement Shares through HCW on the terms and subject to the conditions set forth herein; provided that the
provisions of Section 7(g), Section 9, Section 10, Section 16 and Section 17 hereof shall remain
in full force and effect notwithstanding such termination.

 

(e) This Agreement
shall remain in full force and effect unless terminated pursuant to Sections 11(a), (b), (c), or (d) above
or otherwise by mutual agreement of the parties; provided, however, that any such termination by mutual agreement shall
in all cases be deemed to provide that Section 7(g), Section 9, Section 10, Section 16 and Section
17 shall remain in full force and effect.

 

(f) Any termination
of this Agreement shall be effective on the date specified in such notice of termination; provided, however, that such termination
shall not be effective until the close of business on the date of receipt of such notice by HCW or the Company, as the case may
be. If such termination shall occur prior to the Settlement Date for any sale of Placement Shares, such Placement Shares shall
settle in accordance with the provisions of this Agreement.

 

12.            Notices.
All notices or other communications required or permitted to be given by any party to any other party pursuant to the terms
of this Agreement shall be in writing, unless otherwise specified in this Agreement, and if sent to HCW, shall be delivered
to HCW at H.C. Wainwright & Co. LLC, 430 Park Avenue, New York, NY 10022, email: atm@hcwco.com, Attention: Head of Investment Banking
with a copy to Duane Morris LLP, 1037 Raymond Boulevard, Newark, NJ 07102, attention: Dean M. Colucci, e-mail: dmcolucci@duanemorris.com;
or if sent to the Company, shall be delivered to XBiotech Inc., 8201 E. Riverside Drive, Bldg. 4, Suite 100, Austin, TX
78744, attention: Queena Han, e-mail: qhan@xbiotech.com, with a copies to Bryan Cave LLP, 120 Broadway, Suite 300, Santa
Monica, CA 90401, attention: David Andersen, e-mail: dgandersen@bryancave.com and Stikeman Elliott LLP, 666 Burrard
Street, Suite 1700, Vancouver, BC Canada V6C 2X8, attention: John F. Anderson, e-mail: janderson@stikeman.com. Each
party to this Agreement may change such address for notices by sending to the parties to this Agreement written notice of a
new address for such purpose. Each such notice or other communication shall be deemed given (i) when delivered personally, by
email or by verifiable facsimile transmission (with an original to follow) on or before 4:30 p.m., New York City time, on a
Business Day (as defined below), or, if such day is not a Business Day on the next succeeding Business Day, (ii) on the next
Business Day after timely delivery to a nationally-recognized overnight courier, (iii) on the Business Day actually
received if deposited in the U.S. mail (certified or registered mail, return receipt requested, postage prepaid) and (iv) if
sent by e-mail, on the Business Day on which receipt is confirmed by the individual to whom the notice is sent, other than
via auto-reply. For purposes of this Agreement, “Business Day” shall mean any day on which Exchange
and commercial banks in the City of New York are open for business.

 

    

     

    

An electronic communication (“Electronic
Notice”) shall be deemed written notice for purposes of this Section 12 if sent to the electronic mail address specified
by the receiving party under separate cover. Electronic Notice shall be deemed to be received at the time the party sending Electronic
Notice receives confirmation of receipt by the receiving party. Any party receiving Electronic Notice may request and shall be
entitled to receive the notice on paper, in a non-electronic form (“Non-electronic Notice”) which shall
be sent to the requesting party within ten (10) days of receipt of the written request for Non-electronic Notice.

 

13.           
Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Company and HCW and
their respective successors and the affiliates, controlling persons, officers and directors referred to in Section 9 hereof.
References to any of the parties contained in this Agreement shall be deemed to include the successors and permitted assigns of
such party. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or
their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement. Neither party may assign its rights or obligations under this Agreement without
the prior written consent of the other party; provided, however, that HCW may assign its rights and obligations hereunder
to an affiliate of HCW without obtaining the Company’s consent, so long as such affiliate is a registered broker-dealer.

 

14.           
Adjustments for Share Splits. The parties acknowledge and agree that all share-related numbers contained in this
Agreement shall be adjusted to take into account any share split, share dividend or similar event effected with respect to the
Common Stock.

 

15.           
Entire Agreement; Amendment; Severability. This Agreement (including all schedules and exhibits attached hereto and
Placement Notices issued pursuant hereto) constitutes the entire agreement and supersedes all other prior and contemporaneous agreements
and undertakings, both written and oral, among the parties hereto with regard to the subject matter hereof. Neither this Agreement
nor any term hereof may be amended except pursuant to a written instrument executed by the Company and HCW. In the event that any
one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable
as written by a court of competent jurisdiction, then such provision shall be given full force and effect to the fullest possible
extent that it is valid, legal and enforceable, and the remainder of the terms and provisions herein shall be construed as if such
invalid, illegal or unenforceable term or provision was not contained herein, but only to the extent that giving effect to such
provision and the remainder of the terms and provisions hereof shall be in accordance with the intent of the parties as reflected
in this Agreement.

 

16.           
Applicable Law; Consent to Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of New York without regard to the principles of conflicts of laws. Each party hereby irrevocably submits
to the non-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 with any transaction contemplated hereby, and hereby irrevocably waives,
and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action
or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served
in any such suit, action or proceeding by mailing a copy thereof (certified or registered mail, return receipt requested) 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 manner permitted by law.

 

    

     

    

17.           
Waiver of Jury Trial. The Company and HCW each hereby irrevocably waives any right it may have to a trial by jury
in respect of any claim based upon or arising out of this Agreement or any transaction contemplated hereby.

 

18.           
Absence of Fiduciary Relationship. The Company acknowledges and agrees that:

 

(a) HCW has
been retained solely to act as sales agent in connection with the sale of the Placement Shares and that no fiduciary, advisory
or agency relationship between the Company and HCW has been created in respect of any of the transactions contemplated by this
Agreement, irrespective of whether HCW has advised or is advising the Company on other matters;

 

(b) the Company
is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated
by this Agreement;

 

(c) the Company
has been advised that HCW and its affiliates are engaged in a broad range of transactions which may involve interests that differ
from those of the Company and that HCW has no obligation to disclose such interests and transactions to the Company by virtue of
any fiduciary, advisory or agency relationship; and

 

(d) the Company
waives, to the fullest extent permitted by law, any claims it may have against HCW, for breach of fiduciary duty or alleged breach
of fiduciary duty in connection with the sale of Placement Shares under this Agreement, and agrees that HCW shall have no liability
(whether direct or indirect) to the Company in respect of such a fiduciary claim or to any person asserting a fiduciary duty claim
on behalf of or in right of the Company, including stockholders, partners, employees or creditors of the Company.

 

19.           
Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument. Delivery of an executed Agreement by one party to the other
may be made by facsimile or other electronic transmission.

 

[Remainder of Page Intentionally Blank]

    

     

    

If the foregoing correctly sets forth the
understanding between the Company and HCW, please so indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement between the Company and HCW.

 

	 	Very truly yours,
	 	 	 
	 	H.C. WAINWRIGHT & CO., LLC
	 	 	 
	 	By:	/s/ Edward D. Silvera
	 	Name:	Edward D. Silvera
	 	Title:	Head of Investment Banking
	 	 	 
	 	 	 
	 	ACCEPTED as of the date
	 	first-above written:
	 	 
	 	XBIOTECH INC.

	 	 	 
	 	 	 
	 	By:	/s/ Queena Han
	 	Name: 	Queena Han
	 	Title: 	Vice President, Finance
and Human Resource and Secretary

 

 

    

     

    

SCHEDULE 1

 

form
of PLACEMENT NOTICE

 

 

 

	From:	 	XBiotech Inc.
	To:	 	H.C. Wainwright & Co., LLC
	Subject: 	 	At the Market Offering—Placement Notice
	Date:	 	_______________, 20___

 

Gentlemen:

 

Pursuant to the terms and subject to the
conditions contained in the Sales Agreement between XBiotech Inc. (the “Company”), and H.C. Wainwright &
Co., LLC (“HCW”) dated September 26, 2016 (the “Agreement”), I hereby request on behalf
of the Company that HCW sell up to [ ] shares of the Company’s common stock, no par value per share, at a minimum market
price of $_______ per share. Sales should begin on the date of this Notice and shall continue until [DATE] [all shares are sold][the
aggregate sales price of the shares reaches $[ ]].

 

 

 

 

 

 

 

 

 

 

 

 

 

    

     

    

SCHEDULE 2

 

 

 

Notice Parties

 

 

	The Company	 
	 	 
	John Simard	jsimard@xbiotech.com
	 	 
	Queena Han	qhan@xbiotech.com
	 	 
	HCW	 
	 	 
	Michael Vasinkevich	mv@hcwco.com
	 	 
	Craig Schwabe	cs@hcwco.com  
	 	 
	Peter Fry	pfry@hcwco.com
	 	 
	Charles Worthman	csworthman@hcwco.com
	 	 
	Norman Yun	nyun@hcwco.com
	 	 
	With a copy to	atm@hcwco.com

 

 

    

     

    

SCHEDULE 3

 

 

 

Compensation

 

HCW shall be paid compensation equal to 3.0% of the gross proceeds
from the sales of Placement Shares pursuant to the terms of this Agreement.

 

 

 

    

     

    

Exhibit 7(m) 

 

 

 

OFFICER CERTIFICATE

 

 

The undersigned, the duly qualified and elected  of XBiotech Inc. (“Company”), a corporation continued
under the British Columbia Business Corporations Act, does hereby certify in such capacity and on behalf of the Company,
pursuant to Section 7(m) of the Sales Agreement dated September 26, 2016 (the “Sales Agreement”)
between the H.C. Wainwright & Co., LLC, that to the best of the knowledge of the undersigned:

 

(i)The representations and warranties
of the Company in Section 6 of the Sales Agreement (A) to the extent such representations and warranties are subject to
qualifications and exceptions contained therein relating to materiality or Material Adverse Change, are true and correct on and
as of the date hereof with the same force and effect as if expressly made on and as of the date hereof, except for those representations
and warranties that speak solely as of a specific date and which were true and correct as of such date, and (B) to the extent such
representations and warranties are not subject to any qualifications or exceptions, are true and correct in all material respects
as of the date hereof as if made on and as of the date hereof with the same force and effect as if expressly made on and as of
the date hereof except for those representations and warranties that speak solely as of a specific date and which were true and
correct as of such date; and

 

(ii)The Company has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied pursuant to the Sales Agreement at or prior to
the date hereof.

 

Capitalized terms used but not defined herein
shall have the meanings ascribed to them in the Sales Agreement.

 

 

 

 

	 	XBIOTECH INC.
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title: 

 

 

	Date:

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