Document:

Exhibit 10.1

 

ASSET PURCHASE AGREEMENT

 

This Asset Purchase
Agreement (this “Agreement”) is entered into on December 18, 2015, by and among The Grilled Cheese Truck, Inc.,
a Nevada corporation (“GCT”) and GCT Lobos, Inc., a Nevada corporation and wholly owned subsidiary of GCT (“GCT
Lobos” or the “Buyer”), on the one hand, and The Seawolf Group LLC, a California limited liability
company (the “Seller”), on the other hand. Each of the GCT, GCT Lobos, and the Seller may be referred to as
a “Party” and collectively as the “Parties.”

 

RECITALS:

 

A.          Seller is the owner and operator
of a food truck business located out of Rosemead, California (the “Business”);

 

B.          Seller desires to sell, transfer
and assign to Buyer, and Buyer desires to purchase and acquire from Seller, substantially all of the assets of the Business on
the terms set forth herein.

 

NOW, THEREFORE, in
consideration of the mutual promises, covenants and representations contained herein, the Parties hereto agree as follows:

  

ARTICLE I

 

DEFINED TERMS

 

For all purposes of
this Agreement, the following terms have the meanings indicated:

 

“Action”
means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation,
citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at
law or in equity.

 

“Assigned
Contracts” has the meaning set forth in Section 2.2(f) below.

 

“Assumed Liabilities”
has the meaning set forth in Section 2.4 below.

 

“Bill of Sale”
has the meaning set forth in Section 3.2(a) below.

 

“Business”
has the meaning set forth in Recital A above.

 

“Business
Financial Statements” has the meaning set forth in Section 4.4(a) below.

 

“Buyer”
has the meaning set forth in the preamble to this Agreement.

 

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“Cash Consideration”
has the meaning set forth in Section 2.6(b) below.

 

“Closing”
means the consummation of the purchase and sale transaction contemplated by this Agreement, which shall be deemed to have occurred
at 11:59 p.m. on the Closing Date.

 

“Closing Date”
means the date of the Closing.

 

“Contract”
means all contracts, leases, deeds, mortgages, licenses, instruments, notes, commitments, undertakings, indentures, joint ventures
and all other agreements, commitments and legally binding arrangements, whether written or oral.

 

“Cure and
Resolution Period” has the meaning set forth in Section 7.3(b) below.

 

“Demand Notice”
has the meaning set forth in Section 7.3(a) below.

 

“Disclosure
Schedule” means the Disclosure Schedule which identifies specific sections to which each such disclosure relates and
is delivered to Buyer by Seller in connection with this Agreement.

 

“Encumbrance”
means any charge, claim, community property interest, pledge, condition, equitable interest, lien (statutory or other), option,
security interest, mortgage, easement, encroachment, right of way, right of first refusal, or restriction of any kind, including
any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.

 

“Employee” means
those Persons employed by Seller in connection with the Business immediately prior to the Closing.

 

“Excluded
Assets” has the meaning set forth in Section 2.3 below.

 

“Excluded
Liabilities” has the meaning set forth in Section 2.5 below.

 

“Fixed Assets”
has the meaning set forth in Section 2.2(a) below.

 

“GCT”
has the meaning set forth in the preamble to this Agreement.

 

“GCT Lobos”
has the meaning set forth in the preamble to this Agreement.

 

“Governmental
Authority” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality
of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority
or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the
force of Law), or any arbitrator, court or tribunal of competent jurisdiction.

 

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“Intellectual
Property” means all of the following and similar intangible property and related proprietary rights, interests and protections,
however arising, pursuant to the Laws of any jurisdiction throughout the world: (a) trademarks, service marks, assumed names, trade
names, brand names, logos, trade dress and other proprietary indicia of goods and services, whether registered, unregistered or
arising by Law, and all registrations and applications for registration of such trademarks, including intent-to-use applications,
and all issuances, extensions and renewals of such registrations and applications; (b) internet domain names, whether or not trademarks,
registered in any generic top level domain by any authorized private registrar or Governmental Authority; (c) original works of
authorship in any medium of expression, whether or not published, all copyrights (whether registered, unregistered or arising by
Law), all registrations and applications for registration of such copyrights, and all issuances, extensions and renewals of such
registrations and applications; (d) confidential information, formulas, designs, devices, technology, know-how, research and development,
inventions, methods, processes, compositions and other trade secrets, whether or not patentable; (e) patented and patentable designs
and inventions, all design, plant and utility patents, letters patent, utility models, pending patent applications and provisional
applications and all issuances, divisions, continuations, continuations-in-part, reissues, extensions, reexaminations and renewals
of such patents and applications; and (f) any manuals relating to operations, training, employment, including materials provided
to any licensees.

 

“Intellectual
Property Assets” means all Intellectual Property that is owned by Seller and used in or necessary for the conduct of
the Business.

 

“Intellectual
Property Licenses” means all licenses, sublicenses and other agreements by or through which other Persons grant Seller
exclusive or non-exclusive rights or interests in or to any Intellectual Property that is used in or necessary for the conduct
of the Business as currently conducted.

 

“Indemnitee”
has the meaning set forth in Section 7.3 below.

 

“Indemnitor”
has the meaning set forth in Section 7.3(a) below.

 

“Inventories”
has the meaning set forth in Section 2.2(b) below.

 

“Joint Venture
Agreement” has the meaning set forth in Section 6.1(f)(ii) below.

 

“Knowledge”
of a given Person, and with respect to any fact or matter, the actual knowledge of the directors and executive officers of
such Person and each of its Subsidiaries, together with such knowledge that such directors, executive officers and other employees
could be expected to discover after due investigation concerning the existence of the fact or matter in question.

 

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“Law”
means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement
or rule of law of any Governmental Authority.

 

“Liability”
means a liability, obligation or commitment of any nature whatsoever, asserted or unasserted, known or unknown, absolute or contingent,
accrued or unaccrued, matured or unmatured or otherwise.

 

“License Agreement”
has the meaning set forth in Section 6.1(f)(i) below.

 

“LockUp Agreement”
has the meaning set forth in Section 6.2(h)(iii) below.

 

“Losses”
has the meaning set forth in Section 7.1 below.

 

“Material
Adverse Effect” means any event, occurrence, fact, condition or change that is, or could reasonably be expected to become,
individually or in the aggregate, materially adverse to (a) the business, results of operations, assets or prospects of the Business,
(b) the value of the Transferred Assets, or (c) the ability of Seller to consummate the transactions contemplated hereby on a timely
basis.

 

“Material
Contract” has the meaning set forth in Section 4.7(a) below.

 

“Material
Suppliers” has the meaning set forth in Section 4.10 below.

 

“Outside Closing
Date” has the meaning set forth in Section 3.1 below.

 

“Permits”
means all permits, licenses, franchises, approvals, authorizations, registrations, certificates, variances and similar rights obtained,
or required to be obtained, from Governmental Authorities.

 

“Permitted
Encumbrance” means any statutory lien arising in the ordinary course of business by operation of law with respect to
a Liability that is not yet due or delinquent.

 

“Person”
means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated
organization, trust, association or other entity.

 

“Purchase
Price” has the meaning set forth in Section 2.6(b) below.

 

“Receivables”
has the meaning set forth in Section 2.2(c) below.

 

“Securities
Act” has the meaning set forth in Section 4.16 below.

 

“Seller”
has the meaning set forth in the preamble to this Agreement.

 

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“Shares”
has the meaning set forth in Section 2.6(a) below.

 

“Tax”
means any federal, state, local, foreign or other tax (whether income, sales, FICA, Medicare, use, franchise, excise, real or personal
property or other kind of tax), assessment, levy, impost, withholding or other governmental charge and includes all interest and
penalties thereon.

 

“Tax Returns”
means any return, declaration, report, claim for refund, information return or statement or other document relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof

 

“Transferred
Assets” has the meaning set forth in Section 2.1 below.

  

ARTICLE II

 

PURCHASE AND SALE OF TRANSFERRED ASSETS

 

2.1           Purchase and Sale. Except
as otherwise provided in Section 2.3 below, Seller agrees to sell, assign, transfer, and convey, and Buyer agrees to purchase,
accept, acquire, and take assignment and delivery of, all of the Business, assets, properties, goodwill, and rights of the Business
as a going concern, of every nature, kind, and description, tangible and intangible wherever located and whether or not carried
or reflected on the books and records of the Business (hereinafter sometimes called the “Transferred Assets”),
free and clear of any Encumbrance of any kind whatsoever, except Permitted Encumbrances.

 

2.2           Transferred Assets. The
Transferred Assets include the following:

 

(a)          all equipment, machinery,
leasehold improvements, fixtures, computer hardware, business machines, furniture, supplies, fixed assets, and other tangible personal
property (including spare and maintenance parts) used in or relating to the Business (the “Fixed Assets”) as
set forth in Section 2.2(a) of the Disclosure Schedule;

 

(b)          all inventories (raw materials,
work in process, and finished goods) of the Business (the “Inventories”) as set forth in Section 2.2(b) of
the Disclosure Schedule;

 

(c)          all accounts or
notes receivable and all claims of every description owned and receivable by the Business such as claims for rebates, deposits,
and credits (the “Receivables”) as set forth in Section 2.2(c) of the Disclosure Schedule;

 

(d)          all Intellectual Property
Assets as set forth in Section 4.9(a) of the Disclosure Schedule;

 

(e)          all Permits used
in or related to the Business as set forth in Section 4.12(b) of the Disclosure Schedule.

 

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(f)          all rights and
incidents of interest of Seller or the Business in and to the Contracts and Intellectual Property Licenses listed in Section
2.2(f) of the Disclosure Schedule (the “Assigned Contracts”);

 

(g)          all products and product
ideas, product lines, product improvements, and product technology of the Business whether now being or heretofore researched and
developed by or at the direction of Seller and all products previously researched, developed, or sold by the Business but now discontinued
or on hold;

 

(h)          all claims, causes of action
and rights of Seller against any Person, whether matured or unmatured, direct or indirect, known or unknown, or absolute or contingent
to the extent related to the Transferred Assets as set forth in Section 2.2(h) of the Disclosure Schedule; and

 

(i)           all goodwill and the going
concern value of the Business.

 

2.3           Excluded Assets. No interest
in the following assets (the “Excluded Assets”) is being sold or otherwise transferred by Seller to Buyer under
this Agreement:

 

(a)          any Contract related to
employment arrangements with current or former employees;

 

(b)          any Contract or Intellectual
Property License that is not an Assigned Contract;

 

(c)          Seller’s
cash on hand;

 

(d)          any employee benefit plan
established by Seller or the Business;

 

(e)          a refund or credit, if any,
of Taxes due to Seller on account of the Business which cannot be assigned by law;

 

(f)          deposits with landlords,
utilities, or any other vendor;

 

(g)          the organizational
documents, minute books, books of account, Tax Returns and other records having to do with Seller. However, such documents shall
be made available to Buyer for review upon Buyer’s reasonable request; and

 

(h)          Seller’s rights under
this Agreement.

 

Notwithstanding the
foregoing, Seller agrees to take reasonable steps to make available historical information about Seller and its business for the
purpose of assisting Buyer in having its financial statements audited.

 

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2.4           Assumed Liabilities.
Subject to the terms and conditions set forth herein, Buyer shall assume and agree to pay, perform and discharge the Liabilities
arising after the Closing under the Assigned Contracts, but only to the extent that such Liabilities do not relate to any failure
to perform, improper performance, warranty or other breach, default or violation of Seller on or prior to the Closing (collectively,
the “Assumed Liabilities”).

 

2.5           Excluded Liabilities.
Notwithstanding the provisions of Section 2.4 or any other provision of this Agreement to the contrary, Buyer shall not assume
and shall not be responsible to pay, perform or discharge any Liabilities of Seller of any kind or nature whatsoever whether known
or unknown, contingent, matured or otherwise, whether currently existing or hereinafter created, other than the Assumed Liabilities
(the “Excluded Liabilities”).

 

2.6           Purchase Price. The purchase
price for the Transferred Assets will be as follows:

 

(a)           six hundred fifty thousand (650,000) shares of Series B Convertible Preferred Stock of GCT, the rights, privileges and preferences
of which are set forth in the Certificate of Designation attached hereto as Exhibit A (the “Shares”);
and

 

(b)           an amount equal to any lease deposits as set forth in Schedule 2.2(f), plus the value of any inventory at the date of Closing,
as set forth in Schedule 2.2(b) (the “Cash Consideration” and, together with the Shares, the “Purchase
Price”).

 

2.7           Allocation of Purchase Price.
The Parties agree that the Purchase Price for the Transferred Assets shall be allocated among the Transferred Assets in a manner
that is consistent with Section 1060 of the Internal Revenue Code of 1986, as amended, and that is reasonably acceptable to Buyer.
Buyer and Seller agree that Seller will prepare and file on a timely basis with the Internal Revenue Service (and applicable state
tax authorities) Internal Revenue Service Form 8594 (and corresponding state tax forms), and provide a copy to Seller, who agrees
to file an identical Form 8594 (and corresponding state tax forms). Such forms shall comply with such allocation which has been
approved by Buyer.

  

ARTICLE III

 

CLOSING

 

3.1           Date and Place of Closing;
Termination. The Closing will take place effective as of 11:59 pm, Pacific Time, on December 31, 2015 (the “Closing
Date”) by the exchange of documents via facsimile and email. In the event the Closing does not take place on or before
the Closing Date, Buyer may unilaterally extend the Closing Date for a thirty-day (30) period until January 31, 2016 (the “Outside
Closing Date”). This Agreement may be terminated only by (a) the mutual consent of the Parties, (b) upon a material breach
by any Party after giving the other Parties written notice and five (5) business days to cure the breach, or (c) by any Party after
the Outside Closing Date.

 

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3.2           Deliveries by Seller.
At the Closing, Seller will deliver or cause to be delivered to Buyer all of the following:

 

(a)           a bill of sale, in form
and substance satisfactory to Buyer and as set forth in Exhibit B (the “Bill of Sale”), duly executed
by Seller, warranting, transferring, and conveying to Buyer, or Buyer’s designee, good and marketable title to all of the
Fixed Assets and the Inventories;

 

(b)           a power of attorney in the
form and substance satisfactory to Buyer and as set forth in Exhibit C, duly executed by Seller, allowing Buyer the right
to demand and receive the Receivables and endorse checks received in connection with the Transferred Assets which may still be
in the name of Seller;

 

(c)           such other customary instruments
of transfer, assumption, filings or documents, in form and substance satisfactory to Buyer, as may be requested by Buyer;

 

(d)           copies, certified by Seller
to be true and complete copies, of all of the Assigned Contracts, together with such bulk or individual assignments dated as of
the Closing Date and consents of third parties or a statement by such third party as to the conditions which must be met before
such consents are granted as may be necessary or desirable to effect a transfer to Buyer all of Seller’s rights and interests
under such Assigned Contracts, all in form and substance satisfactory to Buyer;

 

(e)           possession of and title
to all of the Transferred Assets, and Buyer will be entitled to full use and possession of the Transferred Assets as of the Closing
Date;

 

(f)           all consents and approvals
of Governmental Authorities, if required, and third parties, if required, to the transactions contemplated by this Agreement;

 

(g)           a certified UCC-1 (financing
statement) search from the State of California, dated within ten days prior to the Closing Date, showing all financing statements
filed against any of the Transferred Assets, plus copies of any and all such financing statements. Seller represents that no additional
UCC-1s have been filed during such ten (10) day period and that there are no executed but unfiled UCC-1s;

 

(h)           copies of all judgments,
if any, filed against Seller or any of the Transferred Assets; and

 

(i)            copies of all federal and
state tax liens, if any, against Seller or any of the Transferred Assets.

 

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3.3           Deliveries by GCT. At
the Closing, GCT shall deliver to Seller:

 

(a)           the Cash Consideration;
and

 

(b)          the
Shares.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

As a material inducement
to GCT and the Buyer’s willingness to enter into and perform this Agreement, Seller represents and warrants to GCT and the
Buyer, as of the Closing (unless otherwise specified in this Agreement), as follows:

 

4.1           Organization. Seller
is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of California
and has full power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to
carry on the Business as currently conducted.

 

4.2           Authority
of Seller. Seller has full power and authority to enter into this Agreement, to carry out its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery by Seller of this Agreement and any other documents
delivered hereunder, the performance by Seller of its obligations hereunder and the consummation by Seller of the transactions
contemplated hereby have been duly authorized by all requisite company action on the part of Seller. This Agreement has been duly
executed and delivered by Seller, and this Agreement constitutes a legal, valid and binding obligation of Seller enforceable against
Seller in accordance with its terms.

 

4.3           No Conflicts;
Consents. The execution, delivery and performance by Seller of this Agreement, and the consummation of the transactions contemplated
hereby, do not and will not:

 

(a)           conflict with
or result in a violation or breach of, or default under, any provision of the organizational documents of Seller;

 

(b)           conflict with
or result in a violation or breach of any provision of any Law applicable to Seller, the Business, or the Transferred Assets that
would result in a Material Adverse Effect;

 

(c)           require the consent,
notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default or an event
that, with or without notice or lapse of time or both, would constitute a default under, result in the acceleration of or create
in any party the right to accelerate, terminate, modify or cancel any Contract or Permit to which Seller is a party or by which
Seller or the Business is bound or to which any of the Transferred Assets are subject (including any Assigned Contract) that would
result in a Material Adverse Effect; or

 

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(d)           result in the
creation or imposition of any Encumbrance other than Permitted Encumbrances on the Transferred Assets.

 

To Seller’s Knowledge,
other than as set forth in the Disclosure Schedule, no consent, approval, Permit, declaration or filing with, or notice to, any
Governmental Authority is required by or with respect to Seller in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby.

 

4.4           Financial Statements.

 

(a)          Seller has previously delivered
to Buyer the financial statements of the Business consisting of the balance sheet of the Business as of December 31 in each of
the years 2013 and 2014 and the related statements of income and cash flow for the years then ended, and as of September 30, 2015
and the nine months then ended (collectively “Business Financial Statements”). The Business Financial Statements
have been prepared in accordance with Generally Accepted Accounting Principles and to the best of Seller’s knowledge are
true, correct, complete, and not misleading.

 

(b)          The Business Financial Statements
are complete and correct and have been prepared from and substantially conform with the books and records of the Business and present
fairly the financial condition and results of operations of the Business as of the dates and for the periods indicated.

 

4.5           Undisclosed Liabilities.
Seller has no Liabilities with respect to the Business, except (a) those which are adequately reflected or reserved against in
the Business Financial Statements as of September 30, 2015, and (b) those which have been incurred in the ordinary course of business
consistent with past practice since September 30, 2015 and which are not, individually or in the aggregate, in excess of $5,000.          

 

4.6           Absence of Certain Changes,
Events and Conditions. Since September 30, 2015, and except as listed on Section 4.6 of the Disclosure Schedule, none
of the following has occurred, except that which would not have a Material Adverse Effect:

 

(a)          material change in any method
of accounting or accounting practice for the Business;

 

(b)          entry into any Contract;

 

(c)          incurrence, assumption or
guarantee of any indebtedness for borrowed money in connection with the Business or by the Business;

 

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(d)          transfer, assignment, sale,
lien, or other disposition of any of the Transferred Assets or any other asset of the Business except in the ordinary course of
business;

 

(e)          cancellation of any debts
or claims or amendment, termination or waiver of any rights constituting Transferred Assets;

 

(f)          transfer, assignment or
grant of any license or sublicense of any material rights under or with respect to any of the Intellectual Property;

 

(g)          material damage, destruction
or loss, or any material interruption in use, of any Transferred Assets, whether or not covered by insurance;

 

(h)          grant of any bonuses,
whether monetary or otherwise, or any general wage or salary increases in respect of any Employees, other than as provided for
in any written agreements or consistent with past practice, or change in the terms of employment for any Employee;

 

(i)          loan to, or entry
into any other transaction with, any member, manager or employee of Seller; or

 

(j)          any Contract to
do any of the foregoing, or any action or omission that would result in any of the foregoing.

 

4.7           Material Contracts.

 

(a)          Section 4.7
of the Disclosure Schedule lists each of the following Contracts (i) by which any of the Transferred Assets are bound or affected
or (ii) to which Seller is a party or by which it is bound in connection with the Business or the Transferred Assets, excluding
the contracts executed in association with this Agreement (such Contracts listed or otherwise disclosed in Section 4.7 of the
Disclosure Schedule and all Contracts relating to the Intellectual Property set forth in Section 4.9(c) and Section 4.9(e)
of the Disclosure Schedule, being “Material Contracts”):

 

(i)            all Contracts involving aggregate consideration in excess of $5,000 in the aggregate and which, in each case, cannot be
cancelled without penalty or without more than 30 days’ notice;

 

(ii)           all Contracts that require Seller to purchase or sell a stated portion of the requirements or outputs of the Business or
that contain “take or pay” provisions;

 

(iii)          all Contracts that provide for the indemnification of any Person or the assumption of any tax, or other Liability of any
Person;

 

(iv)          all Contracts that relate to the acquisition or disposition of any business, a material amount of stock or assets of any
other Person or any real property (whether by merger, sale of stock, sale of assets or otherwise);

 

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(v)           all broker, distributor, dealer, manufacturer’s representative, franchise, agency, sales promotion, market research,
marketing consulting and advertising Contracts;

 

(vi)          all employment agreements and Contracts with independent contractors or consultants (or similar arrangements) and which
are not cancellable without penalty or without more than 30 days’ notice;

 

(vii)         except for Contracts relating to trade receivables, all Contracts relating to indebtedness (including, without limitation,
guarantees);

 

(viii)        all Contracts with any Governmental Authority;

 

(ix)           all Contracts that limit or purport to limit the ability of Seller to compete in any line of business or with any Person
or in any geographic area or during any period of time;

 

(x)            all joint venture, partnership or similar Contracts;

 

(xi)           all Contracts for the sale of any of the Transferred Assets or for the grant to any Person of any option, right of first
refusal or preferential or similar right to purchase any of the Transferred Assets;

 

(xii)          all powers of attorney with respect to the Business or any Transferred Asset;

 

(xiii)         all collective bargaining agreements or Contracts with any labor organization, union or association; and

 

(xiv)         all other Contracts that are material to the Transferred Assets or the operation of the Business and not previously disclosed
pursuant to this section.

 

(b)          Each Material
Contract is valid and binding on Seller in accordance with its terms and is in full force and effect. None of Seller or, to Seller’s
Knowledge, any other party thereto is in breach of or default under (or is alleged to be in breach of or default under), or has
provided or received any notice of any intention to terminate, any Material Contract. No event or circumstance has occurred that,
to Seller’s Knowledge, with notice or lapse of time or both, would constitute an event of default under any Material Contract
or result in a termination thereof or would cause or permit the acceleration or other changes of any right or obligation or the
loss of any benefit thereunder. Complete and correct copies of each Material Contract (including all modifications, amendments
and supplements thereto and waivers thereunder) have been provided to Buyer. There are no disputes pending or, to Seller’s
Knowledge, threatened under any Contract included in the Transferred Assets.

 

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4.8           Title to, and Sufficiency
of, Transferred Assets.

 

(a)          Seller owns good, marketable
title to all of the Transferred Assets, free and clear of any Encumbrance, title imperfection, or restriction of any kind whatsoever
(whether accrued, absolute, contingent, or otherwise), except Permitted Encumbrances.

 

(b)          The Transferred Assets are
sufficient for the continued conduct of the Business after the Closing in substantially the same manner as conducted prior to the
Closing and constitute all of the rights, property and assets necessary to conduct the Business as currently conducted. The exclusion
of the Excluded Assets will not have a Material Adverse Effect on the Business.

 

(c)          The Inventories will be,
at the Closing, no less than fifty percent (50%) of the average inventory value for the previous ninety (90) days, consist of a
quality and quantity usable and salable in the ordinary course of business, except for obsolete, damaged or slow-moving items that
have been written off or written down to fair market value or for which adequate reserves have been established.

 

4.9           Intellectual
Property.

 

(a)          Section 4.9(a)
of the Disclosure Schedule lists all Intellectual Property Assets, whether or not such Intellectual Property Asset is registered.
All required filings and fees related to the Intellectual Property Assets, the lack of which would have a Material Adverse Effect,
have been timely filed with and paid to the relevant Governmental Authorities and authorized registrars, and all registrations
relating to the Intellectual Property Assets, the lack of which would have a Material Adverse Effect, are otherwise in good standing.
Seller has provided Buyer, to Buyer’s satisfaction at the time of Closing, with true and complete copies of file histories,
documents, certificates, office actions, correspondence and other materials related to all Intellectual Property Assets.

 

(b)          Seller owns all
rights, title and interest in and to the Intellectual Property Assets, free and clear of Encumbrances. Without limiting the generality
of the foregoing, Seller has entered into binding, written agreements with every current and former employee of Seller, and with
every current and former independent contractor who worked on or with Intellectual Property Assets, whereby such employees and
independent contractors (i) assign to Seller any ownership interest and right they may have in the Intellectual Property Assets;
and (ii) acknowledge Seller’s exclusive ownership of all Intellectual Property Assets. Seller is, to its Knowledge, in full
compliance with all legal requirements applicable to the Intellectual Property Assets and Seller’s ownership and use thereof.

 

(c)          Section 4.9(c)
of the Disclosure Schedule lists all Intellectual Property Licenses. Seller has provided Buyer with true and complete copies
of all such Intellectual Property Licenses that are Transferred Assets. All such Intellectual Property Licenses are valid, binding
and enforceable between Seller and the other parties thereto, and Seller and such other parties are in full compliance with the
terms and conditions of such Intellectual Property Licenses.

 

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(d)          The Intellectual
Property Assets and Intellectual Property Licenses as currently or formerly owned, licensed or used by Seller or proposed to be
used by Buyer, and the conduct of the Business as currently and formerly conducted by Seller and proposed to be conducted by Buyer
have not, do not and will not, to Seller’s Knowledge, infringe, violate or misappropriate the Intellectual Property of any
Person. Seller has not received any communication, and no Action has been instituted, settled or, to Seller’s Knowledge,
threatened that alleges any such infringement, violation or misappropriation.

 

(e)          Section 4.9(e)
of the Disclosure Schedule lists all licenses, sublicenses and other agreements pursuant to which Seller grants rights or authority
to any Person with respect to any Intellectual Property. Seller has provided Buyer with true and complete copies of all such agreements.
All such agreements are valid, binding and enforceable between Seller and the other parties thereto, and Seller and such other
parties are, to Seller’s Knowledge, in full compliance with the terms and conditions of such agreements, and no Person has
infringed, violated or misappropriated, or is infringing, violating or misappropriating, any Intellectual Property Assets.

 

4.10         Suppliers.
Section 4.10 of the Disclosure Schedule sets forth with respect to the Business (i) each supplier to whom Seller has paid
consideration for goods or services rendered in an amount greater than or equal to $500 for the period between July 1, 2015 to
November 30, 2015 (collectively, the “Material Suppliers”); and (ii) the amount of purchases from each Material
Supplier during such period. Seller has not received any notice, and has no reason to believe, that any of the Material Suppliers
has ceased, or intends to cease, to supply goods or services to the Business or to otherwise terminate or materially reduce its
relationship with the Business.

 

4.11         Legal Proceedings.

 

(a)          There are no legal
proceedings pending or, to Seller’s Knowledge, threatened against or by Seller (a) relating to or affecting the Business
or the Transferred Assets; or (b) that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by
this Agreement; and no event has occurred or circumstances exist that may give rise to, or serve as a basis for, any such Action.

 

(b)          There are no outstanding
and no unsatisfied judgments, penalties or awards against, relating to or affecting the Business.

 

4.12         Compliance
with Laws; Permits.

 

(a)          To Seller’s
Knowledge, Seller has complied, and is now complying, with all Laws applicable to the conduct of the Business as currently conducted
or the ownership and use of the Transferred Assets.

 

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(b)          All Permits required
for Seller to conduct the Business as currently conducted or for the ownership and use of the Transferred Assets, the lack of which
would have a Material Adverse Effect, have been obtained by Seller and are valid and in full force and effect. All fees and charges
with respect to such Permits as of the date hereof have been paid in full. Section 4.12(b) of the Disclosure Schedule lists
all current Permits issued to Seller which are related to the conduct of the Business as currently conducted or the ownership and
use of the Transferred Assets, including the names of the Permits and their respective dates of issuance and expiration. No event
has occurred that, with or without notice or lapse of time or both, would reasonably be expected to result in the revocation, suspension,
lapse or limitation of any Permit set forth in Section 4.12(b) of the Disclosure Schedule.

 

4.13         Employment
Matters.

 

(a)          Section 4.13
of the Disclosure Schedule contains a list of all persons who are Employees, consultants, or contractors of the Business as of
the date hereof, and sets forth for each such individual the following: (i) name; (ii) title or position (including whether full
or part time); (iii) hire date; (iv) current annual base compensation rate; (v) commission, bonus or other incentive-based compensation;
and (vi) a description of the fringe benefits provided to each such individual as of the date hereof. As of the date hereof, all
commissions and bonuses payable to Employees, consultants, or contractors of the Business for services performed on or prior to
the date hereof have been paid in full and there are no outstanding agreements, understandings or commitments of Seller with respect
to any commissions, bonuses or increases in compensation. Buyer shall have the right, in its sole discretion, to employ, retain,
or contract with any of such persons.

 

(b)          Seller is not
a party to, or bound by, any collective bargaining or other Contract with a labor organization representing any of its Employees,
and to Seller’s Knowledge, there are no labor organizations representing, purporting to represent or attempting to represent
any Employee.

 

(c)          To Seller’s
Knowledge, Seller is and has been in compliance with all applicable Laws pertaining to employment and employment practices to the
extent they relate to the Employees. To Seller’s Knowledge, all individuals characterized and treated by Seller as consultants
or contractors of the Business are properly treated as independent contractors under all applicable Laws.

 

4.14         Taxes.

 

(a)          All Tax Returns
with respect to the Business required to be filed by Seller for any period prior to Closing have been, or will be, timely filed.
Such Tax Returns are, or will be, true, complete and correct in all respects. All Taxes due and owing by Seller (whether or not
shown on any Tax Return) have been, or will be, timely paid.

 

(b)          Seller has withheld
and paid each Tax required to have been withheld and paid in connection with amounts paid or owing to any Employee, independent
contractor, creditor or other party, and complied with all information reporting and backup withholding provisions of applicable
Law.

 

    	15

    	 

    

 

(c)          No extensions
or waivers of statutes of limitations have been given or requested with respect to any Taxes of Seller.

 

(d)          All deficiencies
asserted, or assessments made, against Seller as a result of any examinations by any taxing authority have been fully paid.

 

(e)          Seller is not
a party to any Action by any taxing authority. There are no pending or, to Seller’s Knowledge, threatened Actions by any
taxing authority.

 

(f)          There are no Encumbrances
for Taxes upon any of the Transferred Assets nor, to Seller’s Knowledge, is any taxing authority in the process of imposing
any Encumbrances for Taxes on any of the Transferred Assets (other than for current Taxes not yet due and payable).

 

4.15         Brokers.
Except as set forth in Section 4.15 of the Disclosure Schedule, no broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Seller.

 

4.16         Investment.
Seller is acquiring the Shares for its own account, and not directly or indirectly for the account of any other person. Seller
is acquiring the Shares for investment and not with a view to distribution or resale thereof except in compliance with the Securities
Act of 1933 (the “Securities Act”) and any applicable state law regulating securities.

 

4.17         Registration
of Securities. The shares being acquired by Seller are restricted shares and have not been registered under the Securities
Act of 1933, as amended, or any similar state securities law. Therefore, the Seller must bear the economic risk of investment for
an indefinite period of time. The Shares cannot and will not be sold unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Neither Buyer, GCT, nor any representative of Buyer or GCT has made any
representation, warranty, or covenant whatsoever as to whether any exemption from the Securities Act, including, without limitation,
any exemption for limited sales in routine brokers’ transactions pursuant to Rule 144 under the Securities Act is, or will
become, available. Additionally, the Shares have not been registered or qualified under any applicable state law regulating securities
and therefore the Shares cannot and will not be sold unless it is subsequently registered or qualified under any such act or an
exemption therefrom is available. Neither Buyer, GCT, nor any representative of Buyer or GCT has made any representation, warranty,
or covenant whatsoever as to whether any exemption from any such act is, or will become, available.

 

4.18         Access to
Information. Seller acknowledges that Buyer has made available to it the opportunity to ask questions of and receive answers
from Buyer’s and GCT’s management, including its officers and directors, concerning the terms and conditions of this
Agreement and the business and financial condition of Buyer and GCT, and Seller has received such information about the business
and financial condition of Buyer and GCT and the terms and conditions of the Agreement as it has requested. Seller understands
that the Shares are speculative investments, which involve a high degree of risk of loss of Seller’s entire investment.

 

    	16

    	 

    

 

4.19         Sophistication.
Seller further represents and warrants that Seller has such business or financial expertise as to be able to protect Seller’s
own interests in connection with an investment in the Shares. Seller further represents that it has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits and risk of such investment. Seller also represents
that it has not been organized for the purpose of acquiring securities. Seller further represents that it is being represented
in this transaction by an attorney who is fully familiar with the securities laws affecting this transaction.

 

4.20         Schedules
and Exhibits. All schedules, including the Disclosure Schedule, and exhibits to this Asset Purchase Agreement are true, complete,
and accurate in all material regards.

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES OF GCT
AND BUYER

 

As a material inducement
to Seller’s willingness to enter into and perform this Agreement, GCT and Buyer, jointly and severally, hereby represent
and warrant to Seller that:

 

5.1           Organization. GCT and
Buyer are each a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, with
all requisite power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted
and GCT is duly licensed, authorized and qualified to do business and in good standing in the State of California.

 

5.2           Authority.

 

(a)          This Agreement has been
duly executed and delivered by GCT and Buyer. No other corporate proceedings on the part of GCT or Buyer are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby.

 

(b)          This Agreement is a valid
and binding obligation of GCT and Buyer enforceable against them in accordance with its terms, except as may be affected by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting creditors’ rights generally or by rules of
law governing specific performance, injunctive relief or other equitable principles (regardless of whether such principles are
considered in a proceeding at law or in equity).

 

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(c)          Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) violate, or conflict with, or
require any consent under, or result in a breach of any provisions of, or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required
by, or result in the creation of any Encumbrance upon any of the properties of GCT or Buyer under any of the terms, conditions
or provisions of the Articles of Incorporation or Bylaws of GCT or Buyer or of any note, bond, mortgage, indenture, deed of trust,
license, agreement or other instrument or obligation to which they are a party, or by which they or any of their properties may
be bound or affected, or (ii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to GCT or Buyer
or any of their properties.

 

(d)          No consent or approval by,
notice to or registration with any governmental or administrative authority or board is required on the part of GCT or Buyer in
connection with the execution and delivery by GCT or Buyer of this Agreement, or the performance by GCT or Buyer of any of the
transactions contemplated thereby.

 

5.3           Fees or Commissions.
Except as set forth in Schedule 5.3, GCT and Buyer (including their officers, directors and employees) have not employed
any broker, agent or finder or incurred any Liability for any brokerage fees, agent’s commissions or finder’s fee or
similar obligation in connection with the transactions contemplated in this Agreement.

 

ARTICLE VI

 

CONDITIONS TO CLOSING; COVENANTS

 

6.1           Conditions
to Obligation of Seller. The obligation of the Seller to consummate the transactions in connection with the Closing is subject
to satisfaction of the following conditions:

 

(a)          the representations
and warranties set forth in Article 5 above shall be true and correct in all material respects at and as of the Closing;

 

(b)          GCT and Buyer
shall have performed and complied with all of their covenants hereunder that are to be performed prior to Closing;

 

(c)          no action, suit,
or proceeding shall be pending or threatened before any court or Governmental Authority or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of the transactions contemplated hereby,
(B) cause the transactions contemplated hereby to be rescinded following their consummation, or (C) affect adversely the right
of Buyer to own the Transferred Assets (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect),
and no Governmental Authority shall have enacted, issued, promulgated, enforced or entered any injunction, order, decree, ruling
or other legal restraint or prohibition (whether temporary, preliminary or permanent) which is then in effect and has the effect
of making consummation of the transactions contemplated hereby illegal or prohibiting consummation of said transactions;

 

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(d)          all actions to be taken
by GCT and Buyer in connection with the consummation of the transactions contemplated hereby and all certificates, instruments
of assumption, instruments and other documents required to effect the transactions will be reasonably satisfactory in form and
substance to Seller;

 

(e)          Seller, and its officers,
directors and agents, shall be released from all disclosed obligations under any Assigned Contracts;

 

(f)          Buyer shall, simultaneous
with the execution of this Agreement and the Closing, enter into the following agreements, to be executed simultaneously herewith.

 

(i)         a License Agreement in the form attached hereto as Exhibit D (the “License Agreement”); and

 

(ii)        a Joint Venture Agreement in the form attached hereto as Exhibit E (the “Joint Venture Agreement”).

 

6.2           Conditions
to Obligation of GCT and Buyer. The obligation of GCT and the Buyer to consummate the transactions in connection with the Closing
are subject to satisfaction of the following conditions:

 

(a)          the representations
and warranties set forth in Article 4 above shall be true, correct, complete and not misleading in all material respects at and
as of the Closing and the information contained in all of the schedules and Exhibits to this Asset Purchase Agreement shall be
true, correct, complete and not misleading in all material regards;

 

(b)          Seller shall have
performed and complied with all of its covenants hereunder that are to be performed prior to Closing;

 

(c)          no action, suit,
or proceeding shall be pending or threatened before any court or Governmental Authority or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of the transactions contemplated hereby,
(B) cause the transactions contemplated hereby to be rescinded following their consummation, or (C) affect adversely the right
of Buyer to own the Transferred Assets (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect),
and no Governmental Authority shall have enacted, issued, promulgated, enforced or entered any injunction, order, decree, ruling
or other legal restraint or prohibition (whether temporary, preliminary or permanent) which is then in effect and has the effect
of making consummation of the transactions contemplated hereby illegal or prohibiting consummation of said transactions;

 

(d)          all actions to be taken
by Seller in connection with the consummation of the transactions contemplated hereby and all certificates, instruments of assumption,
instruments and other documents required to effect the transactions will be reasonably satisfactory in form and substance to Buyer;

 

    	19

    	 

    

 

(g)          completion of all bulk sales
notices;

 

(h)          Seller shall, simultaneous
with the execution of this Agreement and the Closing, enter into the following agreements, to be executed simultaneously herewith:

 

(i)        the License Agreement;

 

(ii)       the Joint Venture Agreement; and

 

(iii)      a LockUp Agreement in the form attached hereto as Exhibit F (the “LockUp Agreement”).

 

(i)          the unanimous
consent of Seller’s members, satisfactory to the Buyer in the Buyer’s sole discretion, approving this Agreement and
authorizing the transactions contemplated herein shall have been obtained.

 

6.3           Public Announcements.
Unless otherwise required by Law, neither Seller nor GCT or Buyer shall make any public announcements regarding this Agreement,
the terms of this Agreement or the transactions contemplated by this Agreement without the prior written consent of the other Party.
It is acknowledged that GCT, Buyer’s parent company, is a public company and that it may make such public announcements as
it deems appropriate, in its sole discretion, under the securities laws.

 

6.4           Receivables. From and
after the Closing, if Buyer or one of its affiliates receives or collects any funds relating to any Excluded Asset, Buyer or its
affiliate, as applicable, shall remit such funds to Seller within five (5) business days after its receipt thereof.

 

6.5           Transfer Taxes. All transfer,
documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest)
incurred in connection with this Agreement and the documents to be delivered hereunder shall be borne and paid by Seller when due.
Seller shall, at its own expense, timely file any Tax Return or other document with respect to such Taxes or fees (and Buyer shall
cooperate with respect thereto as necessary).

 

6.6           Third
Party Consents. To the extent that Seller’s rights under any Assigned Contract or Permit constituting a Transferred
Asset, or any other Transferred Asset, may not be assigned to Buyer without the consent of another Person which has not been obtained,
this Agreement shall not constitute an agreement to assign the same if an attempted assignment would constitute a breach thereof
or be unlawful, and Seller, at its expense, shall use its reasonable best efforts to obtain any such required consent(s) as promptly
as possible. If any such consent shall not be obtained or if any attempted assignment would be ineffective or would impair Buyer’s
rights under the Transferred Asset in question so that Buyer would not in effect acquire the benefit of all such rights, Seller,
to the maximum extent permitted by Law and the Transferred Asset, shall act after the Closing as Buyer’s agent in order to
obtain for it the benefits thereunder and shall cooperate, to the maximum extent permitted by Law and the Transferred Asset, with
Buyer in any other reasonable arrangement designed to provide such benefits to Buyer.

 

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6.7           Further Assurances. Following
the Closing, each of the Parties hereto shall, and shall cause their respective affiliates to, execute and deliver such additional
documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the
provisions hereof and give effect to the transactions contemplated by this Agreement and the other documents to be delivered hereunder.

 

6.8           Confidentiality. At all
times following the Closing, Seller will not, directly or indirectly, disclose, divulge or make use of any trade secrets or other
information of a business, financial, marketing, technical or other nature pertaining to the Business, except (a) to the extent
that such information shall have become public knowledge other than by breach of this Agreement by Seller, and (b) to the extent
that disclosure of such information is required by law or legal process (but only after Seller has provided Buyer with reasonable
notice and opportunity to take action against any legally required disclosure).

 

ARTICLE VII

 

INDEMNITY

 

7.1           Indemnity by Seller.
Seller will indemnify, reimburse, defend and hold harmless GCT and the Buyer and their subsidiaries, officers and directors from
and against and in respect of any and all demands, claims, actions, causes of action, assessments, fines, losses, damages, liabilities,
interest, penalties, costs, and expenses (including, without limitation, reasonable legal fees and disbursements incurred in connection
therewith) (“Losses”) resulting from, arising out of, relating to, or incurred by reason of: (a) any breach
of any representation, warranty, covenant, or agreement of Seller contained in this Agreement or any agreement, certificate, instrument,
or document executed and delivered by Seller pursuant hereto; and (b) the operation of the Business by Seller and its agents and
employees prior to the Closing Date.

 

7.2           Indemnity by GCT and Buyer.
GCT and the Buyer, jointly and severally, will indemnify, reimburse, defend, and hold harmless Seller and its subsidiaries, parents,
officers and directors from and against and in respect of any and all Losses suffered, incurred or sustained by any of them or
to which any of them becomes subject, resulting from, arising out of or relating to (a) any breach of the representations and warranties
in this Agreement by GCT or Buyer and (b) the operation of the Business by Buyer and its agents and employees after the Closing
Date.

 

7.3           Method of Asserting Claims.
All claims for indemnification by either Party (the “Indemnitee”) under this Article VII will be asserted and
resolved as follows:

 

(a)          If either Party incurs a
Loss, that Party, as Indemnitee, may give written notice (the “Demand Notice”) of the Indemnitee’s demand
for reimbursement and indemnification to the other Party (the “Indemnitor”). The Demand Notice will describe
in reasonable detail the nature of, and will state the amount of, the Loss or Losses.

 

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(b)          For a period of ten (10)
business days after the Indemnitee gives the Demand Notice (the “Cure and Resolution Period”):

 

(i)          the Indemnitor will have
an opportunity to cure and remedy any event causing a Loss; and

 

(ii)          the Parties will attempt
to negotiate in good faith a resolution and settlement of the subject matter of the Demand Notice satisfactory to all Parties.

 

(c)          If the Indemnitee still
is not satisfied with the cure or the status of negotiations at the end of the Cure and Resolution Period, then the Indemnitee
may pursue any and all remedies available under this Agreement, at law, and in equity, as the Indemnitee considers appropriate.
The Indemnitor shall also have the right to take any reasonable action that it deems necessary to recover for any Losses for which
it is held responsible and for which the Indemnitee has not taken reasonable steps to ameliorate such Losses.

 

7.4           Third-Party Claims. If
a claim giving rise to indemnification hereunder results from, or arises out of, any Action by a Person who is not a party to this
Agreement, the Indemnitor, at its sole cost and expense and upon written notice to the Indemnitee, may assume the defense of any
such Action with counsel reasonably satisfactory to the Indemnitee. The Indemnitee shall be entitled to participate in the defense
of any such Action, with its counsel and at its own cost and expense. If the Indemnitor does not assume the defense of any such
Action, the Indemnitee may, but shall not be obligated to, defend against such Action in such manner as it may deem appropriate,
including, but not limited to, settling such Action, after giving notice of it to the Indemnitor, on such terms as the Indemnitee
may deem appropriate and no action taken by the Indemnitee in accordance with such defense and settlement shall relieve the Indemnitor
of its indemnification obligations herein provided with respect to any damages resulting therefrom. The Indemnitor shall not settle
any Action without the Indemnitee’s prior written consent (which consent shall not be unreasonably withheld, conditioned
or delayed).

 

7.5           Tax Treatment of Indemnification
Payments. All indemnification payments made by Seller under this Agreement shall be treated by the Parties as an adjustment
to the Purchase Price for Tax purposes, unless otherwise required by Law.

 

7.6           Limitation. Notwithstanding
the foregoing in this Article VII, the Parties shall not be liable under this Article VII for any Losses unless and until the aggregate
amount of Losses incurred or suffered by the indemnified Party for which such Party is entitled to recovery under this Agreement
exceeds an aggregate of Fifty Thousand Dollars ($50,000), at which point the indemnitor Party shall be liable for all Losses.

 

    	22

    	 

    

 

ARTICLE VIII

 

SURVIVAL OF REPRESENTATIONS AND WARRANTIES

 

8.1          Nature and Survival of Representations.
All representations and warranties of Seller and Buyer made in this Agreement (including in the Disclosure Schedule) will survive
the Closing Date and shall remain in full force and effect for twenty four (24) months following the Closing, unless otherwise
explicitly extended by the terms of this Agreement.

 

8.2          No Merger. The covenants,
terms, and provisions of this Agreement will survive the Closing.

 

ARTICLE IX

 

MISCELLANEOUS

 

9.1          Amendment or Supplement;
Waiver. This Agreement may only be amended or supplemented by mutual written agreement of the Parties. No waiver by any Party
of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the Party so waiving. No
waiver by any Party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified
by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure
to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed
as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

9.2         Expenses. Each Party
hereto will bear and pay all costs and expenses incurred by it in connection with the transactions contemplated in this Agreement,
including fees and expenses of its own brokers, financial consultants, accountants and counsel.

 

9.3         Entire Agreement. This
Agreement (including all exhibits and schedules attached hereto), and the Closing documents being executed herewith contain the
entire agreement between the Parties with respect to the transactions contemplated hereunder and supersede all prior arrangements
or understandings with respect thereto, written or oral, other than documents referred to herein. The terms and conditions of this
Agreement will inure to the benefit of and be binding upon the Parties hereto and their respective successors. Nothing in this
Agreement, expressed or implied, is intended to confer upon any party, other than the Parties hereto and their respective successors,
any rights, remedies, obligations or liabilities.

 

9.4          Assignment. None of the
Parties hereto may assign any of its rights or obligations under this Agreement to any other person, except that GCT or the Buyer
may assign all its rights and obligations hereunder to any of its subsidiaries without any other Party’s consent, but such
assignment by GCT or the Buyer will not relieve it of its obligations for the ultimate performance thereof.

 

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9.5         Notices.
All notices and other communications which are required or permitted hereunder will be in writing and sufficient if delivered
personally or sent by overnight express addressed as follows:

	 	 	 
	 	If to Buyer:	GCT Lobos, Inc.
	 	 	Attn: President
	 	 	151 North Nob Hill Road, Suite 321
	 	 	Fort Lauderdale, FL 33324
	 	 	 
	 	If to GCT:	The Grilled Cheese Truck, Inc.
	 	 	Attn: President
	 	 	151 North Nob Hill Road, Suite 321
	 	 	Fort Lauderdale, FL 33324
	 	 	 
	 	with a copy to:	Clyde Snow & Sessions
	 	 	Attn: Brian A. Lebrecht
	 	 	201 South Main Street, Thirteenth Floor
	 	 	Salt Lake City, UT 84111
	 	 	 
	 	If to Seller:	The Seawolf Group, LLC
	 	 	Attn: President
	 	 	4470 W. Sunset Blvd, Suite 480
	 	 	Los Angeles, CA 90027

  

or at such other address
as GCT, Buyer or Seller may designate by ten (10) days advance written notice to the other Party hereto.

 

9.6         Governing Law. This Agreement
shall be governed by and construed in accordance with the internal laws of the State of California without giving effect to any
choice or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the
application of Laws of any jurisdiction other than those of the State of California.

 

9.7         Submission to Jurisdiction.
ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY MAY BE
INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA OR THE COURTS OF THE STATE OF CALIFORNIA IN EACH CASE LOCATED
IN THE COUNTY OF LOS ANGELES, AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT,
ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTY’S ADDRESS SET FORTH HEREIN
SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES IRREVOCABLY
AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY
WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

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9.8         Specific Performance.
The Parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with
the terms hereof and that the Parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy
to which they are entitled at law or in equity.

 

9.9         Captions. The captions
contained in this Agreement are for reference purposes only and are not part of this Agreement.

 

9.10        Severability. If any
term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in
any other jurisdiction.

 

9.11       Counterparts/Fax Signatures.
This Agreement may be executed in any number of counterparts, and each such counterpart will be deemed to be an original instrument,
but all such counterparts together will constitute but one agreement. Signatures transmitted via facsimile transmission will constitute
original signatures.

 

9.12        Litigation Expenses.
If any action, suit or proceeding is brought by a Party hereto with respect to a matter or matters covered by this Agreement, all
costs and expenses of the prevailing Party incident to such proceeding, including reasonable attorney fees, will be paid by the
other Party.

 

9.13       Exhibits and Schedules.
All exhibits and schedules (including the Disclosure Schedule) attached to this Agreement are incorporated into this Agreement
by reference.

 

[Signatures on following page]

 

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IN WITNESS WHEREOF,
the Parties hereto have caused this Agreement to be executed on the dates shown below, effective as of the day and year first above
written.

	 	 	 	 
	 	BUYER:	 
	 	 	 	 
	 	GCT LOBOS, INC.	 
	 	 	 	 
	Date:  December 18, 2015	By:	/s/ Algie Hodges	 
	 	Name:  Algie Hodges	 
	 	Title:    President	 
	 	 	 	 
	 	GCT:	 
	 	 	 	 
	 	THE GRILLED CHEESE TRUCK, INC.	 
	 	 	 	 
	Date:  December 18, 2015	By:	/s/ Algie Hodges	 
	 	Name:  Algie Hodges	 
	 	Title:    Chief Executive Officer	 
	 	 	 	 
	 	SELLER:
	 	 	 	 
	 	THE SEAWOLF GROUP, LLC
	 	 	 	 
	Date:  December 18, 2015	By:	/s/ Jasmine Wolf	 
	 	Name:  Jasmine Wolf	 
	 	Title:    Managing Member	 

 

Signature Page to Asset Purchase Agreement

 

    	 

    	 

    

 

	Disclosure Schedules:	Exhibits:
	2.2(a) – Fixed Assets	A – Certificate of Designation
	2.2(b) – Inventories	B – Bill of Sale
	2.2(c) – Receivables	C – Special Power of Attorney
	2.2(f) – Assigned Contracts	D – License Agreement
	2.2(h) – Litigation	E – Joint Venture Agreement
	4.6 – Absence of Certain Changes, Events and Conditions	F – LockUp Agreement
	4.7 – Material Contracts	 
	4.9(a) – Intellectual Property Assets	 
	4.9(c) – Intellectual Property Licenses	 
	4.9(e) – Licenses	 
	4.10 – Suppliers	 
	4.12(b) – Permits	 
	4.13 – Employees	 
	4.15 – Brokers	 
	5.3 – Brokersex4_1.htm

SUBORDINATED NOTE CERTIFICATE

 

 

FIRST GUARANTY BANCSHARES, INC.

4.0% FIXED TO FLOATING SUBORDINATED NOTE DUE DECEMBER 21, 2025

 

THE INDEBTEDNESS EVIDENCED BY THIS SUBORDINATED NOTE IS SUBORDINATED AND JUNIOR IN RIGHT OF PAYMENT TO THE CLAIMS OF CREDITORS (OTHER THAN CREDITORS OF EXISTING SUBORDINATED DEBT) OF FIRST GUARANTY BANCSHARES, INC. (THE “COMPANY”), AND DEPOSITORS OF FIRST GUARANTY BANK, INCLUDING OBLIGATIONS OF THE COMPANY TO ITS GENERAL AND SECURED CREDITORS AND IS UNSECURED.  IT IS INELIGIBLE AS COLLATERAL FOR ANY EXTENSION OF CREDIT BY THE COMPANY OR ANY OF ITS SUBSIDIARIES.  IN THE EVENT OF LIQUIDATION ALL DEPOSITORS AND OTHER CREDITORS OF THE COMPANY SHALL BE ENTITLED TO BE PAID IN FULL WITH SUCH INTEREST AS MAY BE PROVIDED BY LAW BEFORE ANY PAYMENT SHALL BE MADE ON ACCOUNT OF PRINCIPAL OF OR INTEREST ON THIS SUBORDINATED NOTE.  AFTER PAYMENT IN FULL OF ALL SUMS OWING TO SUCH DEPOSITORS AND CREDITORS, THE HOLDER OF THIS SUBORDINATED NOTE SHALL BE ENTITLED TO BE PAID FROM THE REMAINING ASSETS OF THE COMPANY THE UNPAID PRINCIPAL AMOUNT OF THIS SUBORDINATED NOTE PLUS ACCRUED AND UNPAID INTEREST THEREON BEFORE ANY PAYMENT OR OTHER DISTRIBUTION, WHETHER IN CASH, PROPERTY OR OTHERWISE, SHALL BE MADE ON ACCOUNT OF ANY SHARES OF CAPITAL STOCK OF THE COMPANY.

 

THE INDEBTEDNESS EVIDENCED BY THIS SUBORDINATED NOTE IS NOT A DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (THE “FDIC”) OR ANY OTHER GOVERNMENT AGENCY OR FUND.

 

THIS SUBORDINATED NOTE WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN MINIMUM DENOMINATIONS OF $1,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF.  ANY ATTEMPTED TRANSFER OF THIS SUBORDINATED NOTE IN A DENOMINATION OF LESS THAN $1,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.  ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF THIS SUBORDINATED NOTE FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PAYMENTS ON THIS SUBORDINATED NOTE, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SUBORDINATED NOTE.

 

THIS SUBORDINATED NOTE MAY BE SOLD ONLY IN COMPLIANCE WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS.  THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS.  NEITHER THIS SUBORDINATED NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  THIS SUBORDINATED NOTE IS ISSUED SUBJECT TO THE RESTRICTIONS ON TRANSFER AND OTHER PROVISIONS OF THE SUBORDINATED NOTE PURCHASE AGREEMENT DATED DECEMBER 21, 2015, BETWEEN THE COMPANY AND THE PURCHASER REFERRED TO THEREIN (THE “PURCHASE AGREEMENT”), A COPY OF WHICH IS ON FILE WITH THE COMPANY.

 

  

  

  

CERTAIN ERISA CONSIDERATIONS:

 

THE HOLDER OF THIS SUBORDINATED NOTE, OR ANY INTEREST HEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SUBORDINATED NOTE, OR ANY INTEREST HEREIN, ARE NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE AND HOLDING. ANY PURCHASER OR HOLDER OF THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER: (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER PLAN TO WHICH TITLE I OF ERISA OR SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE “PLAN ASSETS” OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE OR (ii) SUCH PURCHASE OR HOLDING WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH FULL EXEMPTIVE RELIEF IS NOT AVAILABLE UNDER APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

 

ANY FIDUCIARY OF ANY PLAN WHO IS CONSIDERING THE ACQUISITION OF THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN SHOULD CONSULT WITH HIS OR HER LEGAL COUNSEL PRIOR TO ACQUIRING THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN.

 

  

  

  

No. 2025-1

 

FIRST GUARANTY BANCSHARES, INC.

 

4.0% FIXED TO FLOATING RATE SUBORDINATED NOTE DUE 2025

 

1. Subordinated Notes. This Subordinated Note is one of an issue of notes of First Guaranty Bancshares, Inc., a Louisiana corporation (the “Company”) designated as the “4.0% Fixed to Floating Rate Subordinated Notes due 2025” (the “Subordinated Notes”).

 

2. Payment. The Company, for value received, promises to pay to Edgar Ray Smith, III, or his registered assigns, the principal sum of Fifteen Million Dollars (U.S.) ($15,000,000), plus accrued but unpaid interest on December 21, 2025 (“Stated Maturity”) and to pay interest thereon (i) from and including the original issue date of the Subordinated Note to but excluding December 21, 2020 or the earlier redemption date contemplated by Section 4(a) of this Subordinated Note, at the rate of 4.0% per annum, computed on the basis of a 360-day year consisting of twelve 30-day months and payable semi-annually in arrears on January 1 and July 1 of each year (each, a “Fixed Interest Payment Date”), and (ii) from and including December 21, 2020 to but excluding the Stated Maturity or the earlier redemption date contemplated by Section 4(b) of this Subordinated Note, at the rate per annum, reset quarterly, equal to the Wall Street Journal’s Prime Rate determined on the determination date of the applicable Interest Period plus 75 basis points, computed on the basis of a 360-day year and the actual number of days elapsed and payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year (each, a “Floating Interest Payment Date”).  An “Interest Payment Date” is either a Fixed Interest Payment Date or a Floating Interest Payment Date, as applicable. Any payment of principal of or interest on this Subordinated Note that would otherwise become due and payable on a day which is not a Business Day shall become due and payable on the next succeeding Business Day, with the same force and effect as if made on the date for payment of such principal or interest, and no interest will accrue in respect of such payment for the period after such day. The term “Business Day” means any day that is not a Saturday or Sunday and that is not a day on which banks in the State of Louisiana are generally authorized or required by law or executive order to be closed.

 

3. Subordination.  The indebtedness of the Company evidenced by this Subordinated Note, including the principal and interest on this Subordinated Note, shall be subordinate and junior in right of payment to the prior payment in full of all existing claims of creditors and depositors of the Company, whether now outstanding or subsequently created, assumed, guaranteed or incurred (collectively, “Senior Indebtedness”), which shall consist of principal of (and premium, if any) and interest, if any, on: (a) all indebtedness and obligations of, or guaranteed or assumed by, the Company for money borrowed, whether or not evidenced by bonds, debentures, securities, notes or other similar instruments, and including, but not limited to, deposits of the Company, and all obligations to the Company’s general and secured creditors; (b) any deferred obligations of the Company for the payment of the purchase price of property or assets acquired other than in the ordinary course of business; (c) all obligations, contingent or otherwise, of the Company in respect of any letters of credit, bankers’ acceptances, security purchase facilities and similar direct credit substitutes; (d) any capital lease obligations of the Company; (e) all obligations of the Company in respect of interest rate swap, cap or other agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts, commodity contracts and other similar arrangements or derivative products; (f) all obligations that are similar to those in clauses (a) through (e) of other persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise arising from an off-balance sheet guarantee; and (g) all obligations of the types referred to in clauses (a) through (f) of other persons secured by a lien on any property or asset of the Company, and (h) in the case of (a) through (g) above, all amendments, renewals, extensions, modifications and refundings of such indebtedness and obligations; except “Senior Indebtedness” does not include (i) the Subordinated Notes, (ii) any obligation that by its terms expressly is junior to, or ranks equally in right of payment with, the Subordinated Notes, or (iii) any indebtedness between the Company and any of its subsidiaries.  This Subordinated Note is not secured by any assets of the Company.

 

  

  

  

In the event of liquidation of the Company, all creditors of the Company shall be entitled to be paid in full with such interest as may be provided by law before any payment shall be made on account of principal of or interest on this Subordinated Note.  Additionally, in the event of any insolvency, dissolution, assignment for the benefit of creditors or any liquidation or winding up of or relating to the Company, whether voluntary or involuntary, holders of Senior Indebtedness shall be entitled to be paid in full before any payment shall be made on account of the principal of or interest on the Subordinated Notes, including this Subordinated Note.  In the event of any such proceeding, after payment in full of all sums owing with respect to the Senior Indebtedness, the registered holders of the Subordinated Notes from time to time (each a “Noteholder” and, collectively, the “Noteholders”), together with the holders of any obligations of the Company ranking on a parity with the Subordinated Notes, shall be entitled to be paid from the remaining assets of the Company the unpaid principal thereof, and the unpaid interest thereon before any payment or other distribution, whether in cash, property or otherwise, shall be made on account of any capital stock.

 

If there shall have occurred and be continuing (a) a default in any payment with respect to any Senior Indebtedness or (b) an event of default with respect to any Senior Indebtedness as a result of which the maturity thereof is accelerated, unless and until such payment default or event of default shall have been cured or waived or shall have ceased to exist, no payments shall be made by the Company with respect to the Subordinated Notes.  The provisions of this paragraph shall not apply to any payment with respect to which the immediately preceding paragraph of this Section 3 would be applicable.

 

Nothing herein shall act to prohibit, limit or impede the Company from issuing additional debt of the Company having the same rank as the Subordinated Notes or which may be junior or senior in rank to the Subordinated Notes.

 

4. Redemption.

 

(a) Redemption Prior to Fifth Anniversary.  This Subordinated Note shall not be redeemable by the Company in whole or in part prior to the fifth anniversary of the date upon which this Subordinated Note was originally issued (the “Issue Date”), except in the event: (i) this Subordinated Note no longer qualifies as “Tier 2” Capital (as defined by the Board of Governors of the Federal Reserve System (the “Federal Reserve”)) as a result of a change in interpretation or application of law or regulation by any judicial, legislative or regulatory authority that becomes effective after the date of issuance of this Subordinated Note (“Tier 2 Capital Event”); (ii) of a Tax Event (as defined below); or (iii) the Company becomes required to register as an investment company pursuant to the Investment Company Act of 1940, as amended (and “Investment Company Event”).  Upon the occurrence of a Tier 2 Capital Event, a Tax Event or an Investment Company Event, the Company may redeem this Subordinated Note in whole at any time, or in part from time to time, upon giving not less than 10 days’ notice to the holder of this Subordinated Note at an amount equal to 100% of the outstanding principal amount being redeemed plus accrued but unpaid interest to, but excluding, the redemption date.  “Tax Event” means the receipt by the Company of an opinion of counsel to the Company that as a result of any amendment to, or change (including any final and adopted (or enacted) prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, there exists a material risk that interest payable by the Company on the Subordinated Notes is not, or within 120 days after the receipt of such opinion will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes.

 

(b) Redemption on or after Fifth Anniversary.  On or after the fifth anniversary of the Issue Date, this Subordinated Note shall be redeemable at the option of and by the Company, in whole or in part at any time upon any Interest Payment Date, at an amount equal to 100% of the outstanding principal amount being redeemed plus accrued but unpaid interest, to but excluding the redemption date, but in all cases in a principal amount with integral multiples of $1,000.  In addition, the Company may redeem all or a portion of the Subordinated Notes, at any time upon the occurrence of a Tier 2 Capital Event, Tax Event or an Investment Company Event.

 

(c) Partial Redemption.   If less than the then outstanding principal amount of this Subordinated Note is redeemed, (i) a new Subordinated Note shall be issued representing the unredeemed portion without charge to the holder thereof and (ii) such redemption shall be effected on a pro rata basis as to the Noteholders.  For purposes of clarity, upon a partial redemption, a like percentage of the principal amount of every Subordinated Note held by every Noteholder shall be redeemed.

 

(d) No Redemption at Option of Noteholder.  This Subordinated Note is not subject to redemption at the option of the holder of this Subordinated Note.

 

(e) Effectiveness of Redemption.  If notice of redemption has been duly given and notwithstanding that this Subordinated Note has been called for redemption but has not yet been surrendered for cancellation, on and after the date fixed for redemption interest shall cease to accrue on this Subordinated Note, this Subordinated Note shall no longer be deemed outstanding and all rights with respect to this Subordinated Note shall forthwith on such date fixed for redemption cease and terminate unless the Company shall default in the payment of the redemption price, except only the right of the holder hereof to receive the amount payable on such redemption, without interest.

 

(f) Regulatory Approvals. Any such redemption shall be subject to receipt of any and all required federal and state regulatory approvals, including, but not limited to, the consent of the Federal Reserve.  In the case of any redemption of this Subordinated Note pursuant to paragraphs (b) and (c) of this Section 4, the Company will give the holder hereof notice of redemption, which notice shall indicate the aggregate principal amount of Subordinated Notes to be redeemed, not less than 30 nor more than 45 calendar days prior to the redemption date.

 

  

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(g) Purchase and Resale of the Subordinated Notes. Subject to any required federal and state regulatory approvals and the provisions of this Subordinated Note, the Company shall have the right to purchase any of the Subordinated Notes at any time in the open market, private transactions or otherwise.  If the Company purchases any Subordinated Notes, it may, in its discretion, hold, resell or cancel any of the purchased Subordinated Notes.

 

5. Events of Default; Acceleration; Compliance Certificate. Each of the following events shall constitute an  “Event of Default”:

 

(a) the entry of a decree or order for relief in respect of the Company by a court having jurisdiction in the premises in an involuntary case or proceeding under any applicable bankruptcy, insolvency, or reorganization law, now or hereafter in effect of the United States or any political subdivision thereof, and such decree or order will have continued unstayed and in effect for a period of 60 consecutive days;

 

(b) the commencement by the Company of a voluntary case under any applicable bankruptcy, insolvency or reorganization law, now or hereafter in effect of the United States or any political subdivision thereof, or the consent by the Company to the entry of a decree or order for relief in an involuntary case or proceeding under any such law;

 

(c) the failure of the Company to pay any installment of interest on any of the Subordinated Notes as and when the same will become due and payable, and the continuation of such failure for a period of 30 days;

 

(d) the failure of the Company to pay all or any part of the principal of any of the Subordinated Notes as and when the same will become due and payable;

 

(e) the failure of the Company to perform any other covenant or agreement on the part of the Company contained in the Subordinated Notes, and the continuation of such failure for a period of 60 days after the date on which notice specifying such failure, stating that such notice is a “Notice of Default” hereunder and demanding that the Company remedy the same, will have been given, in the manner set forth in Section 21, to the Company by the Noteholders of at least 25% in aggregate principal amount of the Subordinated Notes at the time outstanding; or the default by the Company under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company having an aggregate principal amount outstanding of at least $25,000,000, whether such indebtedness now exists or is created or incurred in the future, which default (i) constitutes a failure to pay any portion of the principal of such indebtedness when due and payable after the expiration of any applicable grace period or (ii) results in such indebtedness becoming due or being declared due and payable prior to the date on which it otherwise would have become due and payable without, in the case of clause (i), such indebtedness having been discharged or, in the case of clause (ii), without such indebtedness having been discharged or such acceleration having been rescinded or annulled.

 

  

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Unless the principal of this Subordinated Note already shall have become due and payable, if an Event of Default set forth in subsections (a) or (b) above shall have occurred and be continuing, the holder of this Subordinated Note, by notice in writing to the Company, may declare the principal amount of this Subordinated Note to be due and payable immediately and, upon any such declaration the same shall become and shall be immediately due and payable.  The Company waives demand, presentment for payment, notice of nonpayment, notice of protest, and all other notices. The Company, within 45 calendar days after the receipt of written notice from any Noteholder of the occurrence of an Event of Default with respect to this Subordinated Note, shall mail to all Noteholders, at their addresses shown on the Security Register (as defined in Section 13 below), such written notice of Event of Default, unless such Event of Default shall have been cured or waived before the giving of such notice as certified by the Company in writing.

 

6. Failure to Make Payments. In the event of failure by the Company to make any required payment of principal or interest on this Subordinated Note (and, in the case of payment of interest, such failure to pay shall have continued for 15 calendar days), the Company will, upon demand of the holder of this Subordinated Note, pay to the holder of this Subordinated Note the amount then due and payable on this Subordinated Note for principal and interest (without acceleration of the Note in any manner), with interest on the overdue principal and interest at the rate borne by this Subordinated Note, to the extent permitted by applicable law.  If the Company fails to pay such amount upon such demand, the holder of this Subordinated Note may, among other things, institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company and collect the amounts adjudged or decreed to be payable in the manner provided by law out of the property of the Company.

 

Upon the occurrence of a failure by the Company to make any required payment of principal or interest on this Subordinated Note, or an Event of Default until such Event of Default is cured by the Company, the Company shall not: (a) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company’s capital stock; (b) make any payment of principal or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank equal with or junior to the Subordinated Notes; or (c) make any payments under any guarantee that ranks equal with or junior to the Subordinated Notes, other than (i) any dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, any class of the Company’s common stock; (ii) any declaration of a dividend in connection with the implementation of a shareholders’ rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto; (iii) as a result of a reclassification of the Company’s capital stock or the exchange or conversion of one class or series of the Company’s capital stock for another class or series of the Company’s capital stock; (iv) the purchase of fractional interests in shares of the Company’s capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged; or (v) purchases of any class of the Company’s common stock related to the issuance of common stock or rights under any benefit plans for the Company’s directors, officers or employees or any of the Company’s dividend reinvestment plans.

 

  

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7.  

	
Affirmative Covenants of the Company.

 

(a) Payment of Principal and Interest. The Company covenants and agrees for the benefit of the holder of this Subordinated Note that it will duly and punctually pay the principal of, and interest on, this Subordinated Note, in accordance with the terms hereof.  Principal and interest will be considered paid on the date due if the Company or a subsidiary thereof, holds as of 11:00 a.m., Hammond, Louisiana time, on any Interest Payment Date, an amount in immediately available funds provided by the Company that is designated for and sufficient to pay all principal and interest then due.

 

(b) Maintenance of Office. The Company will maintain an office or agency in Hammond, Louisiana where Subordinated Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Subordinated Notes may be served.

 

 The Company may also from time to time designate one or more other offices or agencies where the Subordinated Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission will in any manner relieve the Company of its obligation to maintain an office or agency in Hammond, Louisiana. The Company will give prompt written notice to the Noteholders of any such designation or rescission and of any change in the location of any such other office or agency.

 

(c) Corporate Existence. The Company will do or cause to be done all things necessary to preserve and keep in full force and effect: (i) the corporate existence of the Company; (ii) the existence (corporate or other) of each subsidiary; and (iii) the rights (charter and statutory), licenses and franchises of the Company and each of its subsidiaries; provided, however, that the Company will not be required to preserve the existence (corporate or other) of any of its subsidiaries or any such right, license or franchise of the Company or any of its subsidiaries if the Board of Directors of the Company determines that the preservation thereof is no longer desirable in the conduct of the business of the Company and its subsidiaries taken as a whole and that the loss thereof will not be disadvantageous in any material respect to the Noteholders.

 

(d) Maintenance of Properties. The Company will, and will cause each subsidiary to, cause all its properties used or useful in the conduct of its business to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section will prevent the Company or any subsidiary from discontinuing the operation and maintenance of any of their respective properties if such discontinuance is, in the judgment of the Board of Directors of the Company or of any subsidiary, as the case may be desirable in the conduct of its business.

 

(e) Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any term, provision or condition set forth in Section 7(a) or Section 7(b) above, with respect to this Subordinated Note if before the time for such compliance the Noteholders of at least a majority in principal amount of the outstanding Subordinated Notes, by act of such Noteholders, either will waive such compliance in such instance or generally will have waived compliance with such term, provision or condition, but no such waiver will extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver will become effective, the obligations of the Company in respect of any such term, provision or condition will remain in full force and effect.

 

  

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(f) Company Statement as to Compliance. The Company will deliver to the Noteholders, within 120 days after the end of each fiscal year, an Officer’s Certificate covering the preceding calendar year, stating whether or not, to the best of his or her knowledge, the Company is in default in the performance and observance of any of the terms, provisions and conditions of this Subordinated Note (without regard to notice requirements or periods of grace) and if the Company will be in default, specifying all such defaults and the nature and status thereof of which he or she may have knowledge.

 

(g) Tier 2 Capital.  If all or any portion of the Subordinated Notes ceases to be deemed to be Tier 2 Capital, other than due to the limitation imposed on the capital treatment of subordinated debt during the five years immediately preceding the Maturity Date of the Subordinated Notes, the Company and the Noteholders will work together in good faith to execute and deliver all agreements as reasonably necessary in order to restructure the applicable portions of the obligations evidenced by the Subordinated Notes to qualify as Tier 2 Capital.

 

(h) Compliance with Laws.  The Company shall comply with the requirements of all laws, regulations, orders and decrees applicable to it or its properties, except for such noncompliance that would not reasonably be expected to result in a material adverse effect (i) in the condition (financial or otherwise), or in the earnings of the Company, whether or not arising in the ordinary course of business, or (ii) on the ability of the Company to perform its obligations under this Subordinated Note.

 

(i) Taxes and Assessments.  The Company shall punctually pay and discharge all material taxes, assessments, and other governmental charges or levies imposed upon it or upon its income or upon any of its properties; provided, that no such taxes, assessments or other governmental charges need be paid if they are being contested in good faith by the Company.

 

8. Negative Covenants of the Company.

 

(a) Limitation on Dividends.  The Company shall not declare or pay any dividend or make any distribution on capital stock or other equity securities of any kind of the Company if the Company is not “well capitalized” for regulatory purposes immediately prior to the declaration of such dividend or distribution, except for dividends payable solely in shares of common stock of the Company.

 

(b) Merger or Sale of Assets.  The Company shall not merge into another entity or convey, transfer or lease substantially all of its properties and assets to any person, unless:

 

(i)           the continuing entity into which the Company is merged or the person which acquires by conveyance or transfer or which leases substantially all of the properties and assets of the Company shall be a corporation, association or other legal entity organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and expressly assumes the due and punctual payment of the principal of and any premium and interest on the Subordinated Notes according to their terms, and the due and punctual performance of all covenants and conditions hereof on the part of the Company to be performed or observed; and

 

  

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(ii)           immediately after giving effect to such transaction, no Event of Default (as defined below), and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing.

 

9. Denominations.  The Subordinated Notes are issuable only in registered form without interest coupons in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof.

 

10. Charges and Transfer Taxes.  No service charge will be made for any registration of transfer or exchange of this Subordinated Note, or any redemption or repayment of this Subordinated Note, or any conversion or exchange of this Subordinated Note for other types of securities or property, but the Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the transfer or exchange of this Subordinated Note from the Noteholder requesting such transfer or exchange.

 

11. Payment Procedures.  Payment of the principal and interest payable on the Maturity Date will be made by check, or by wire transfer in immediately available funds to a bank account in the United States designated by the registered holder of this Subordinated Note if such Noteholder shall have previously provided wire instructions to the Company, upon presentation and surrender of this Subordinated Note at the Payment Office (as defined in Section 21 below) or at such other place or places as the Company shall designate by notice to the registered Noteholders as the Payment Office, provided that this Subordinated Note is presented to the Company in time for the Company to make such payments in such funds in accordance with its normal procedures.  Payments of interest (other than interest payable on the Maturity Date) shall be made by wire transfer in immediately available funds or check mailed to the registered holder of this Subordinated Note, as such person’s address appears on the Security Register (as defined below).  Interest payable on any Interest Payment Date shall be payable to the Noteholder in whose name this Subordinated Note is registered at the close of business on the fifteenth calendar day prior to the applicable Interest Payment Date, without regard to whether such date is a Business Day (such date being referred to herein as the “Regular Record Date”), except that interest not paid on the Interest Payment Date, if any, will be paid to the holder in whose name this Subordinated Note is registered at the close of business on a special record date fixed by the Company (a “Special Record Date”), notice of which shall be given to the holder of this Subordinated Note not less than 10 calendar days prior to such Special Record Date.  (The Regular Record Date and Special Record Date are referred to herein collectively as the “Record Dates”).  To the extent permitted by applicable law, interest shall accrue, at the rate at which interest accrues on the principal of this Subordinated Note, on any amount of principal or interest on this Subordinated Note not paid when due.  All payments on this Subordinated Note shall be applied first against costs and expenses of the holder of this Subordinated Note; then against interest due hereunder; and then against principal due hereunder.  The holder of this Subordinated Note acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of this Subordinated Note and all interest hereon shall be pari passu in right of payment and in all other respects to the other Subordinated Notes.  In the event that the holder of this Subordinated Note receives payments in excess of its pro rata share of the Company’s payments to the holders of all of the Subordinated Notes, then the holder of this Subordinated Note shall hold in trust all such excess payments for the benefit of the holders of the other Subordinated Notes and shall pay such amounts held in trust to such other holders upon demand by such holders.

 

  

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12. Form of Payment.  Payments of principal and interest on this Subordinated Note shall be made in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts.

 

13. Registration of Transfer, Security Register.  Except as otherwise provided herein, this Subordinated Note is transferable in whole or in part, and may be exchanged for a like aggregate principal amount of Subordinated Notes of other authorized denominations, by the holder of this Subordinated Note in person, or by his attorney duly authorized in writing, at the Payment Office.  The Company shall maintain a register providing for the registration of the Subordinated Notes and any exchange or transfer thereof (the “Security Register”).  Upon surrender or presentation of this Subordinated Note for exchange or registration of transfer, the Company shall execute and deliver in exchange therefor a Subordinated Note or Subordinated Notes of like aggregate principal amount, each in a minimum denomination of $1,000 or any amount in excess thereof which is an integral multiple of $1,000 (and, in the absence of an opinion of counsel satisfactory to the Company to the contrary, bearing the restrictive legend(s) set forth hereinabove) and that is or are registered in such name or names requested by the Noteholder.  Any Subordinated Note presented or surrendered for registration of transfer or for exchange shall be duly endorsed and accompanied by a written instrument of transfer in such form as is attached hereto and incorporated herein, duly executed by the holder of this Subordinated Note or his attorney duly authorized in writing, with such tax identification number or other information for each person in whose name a Subordinated Note is to be issued, and accompanied by evidence of compliance with any restrictive legend(s) appearing on such Subordinated Note or Subordinated Notes as the Company may reasonably request to comply with applicable law.  No exchange or registration of transfer of this Subordinated Note shall be made on or after the fifteenth day immediately preceding the Maturity Date.

 

14. Charges and Transfer Taxes.  No service charge will be made for any registration of transfer or exchange of this Subordinated Note, or any redemption or repayment of this Subordinated Note, or any conversion or exchange of this Subordinated Note for other types of securities or property, but the Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the transfer or exchange of this Subordinated Note from the Noteholder requesting such transfer or exchange.

 

15. Priority. The Subordinated Notes rank pari passu among themselves and pari passu, in the event of any insolvency proceeding, dissolution, assignment for the benefit of creditors, reorganization, restructuring of debt, marshaling of assets and liabilities or similar proceeding or any liquidation or winding up of the Company, with all other present or future unsecured subordinated debt obligations of the Company, except any unsecured subordinated debt that, pursuant to its express terms, is senior or subordinate in right of payment to the Subordinated Notes.

 

  

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16. Ownership.  Prior to due presentment of this Subordinated Note for registration of transfer, the Company may treat the holder in whose name this Subordinated Note is registered in the Security Register as the absolute owner of this Subordinated Note for receiving payments of principal and interest on this Subordinated Note and for all other purposes whatsoever, whether or not this Subordinated Note be overdue, and the Company shall not be affected by any notice to the contrary.

 

17. Waiver and Consent.  Any consent or waiver given by the holder of this Subordinated Note shall be conclusive and binding upon such holder and upon all future holders of this Subordinated Note and of any Subordinated Note issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Subordinated Note.  This Subordinated Note may be also amended or waived pursuant to, and in accordance with, the provisions of Section 8.3 of the Purchase Agreement.  No delay or omission of the holder of this Subordinated Note to exercise any right or remedy accruing upon any Event of Default shall impair such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Any insured depository institution which shall be a holder of this Subordinated Note or which otherwise shall have any beneficial ownership interest in this Subordinated Note shall, by its acceptance of such Subordinated Note (or beneficial interest therein), be deemed to have waived any right of offset with respect to the indebtedness evidenced thereby.

 

18. Absolute and Unconditional Obligation of the Company.  No provisions of this Subordinated Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal and interest on this Subordinated Note at the times, places and rate, and in the coin or currency, herein prescribed.

 

(a) No delay or omission of the holder of this Subordinated Note to exercise any right or remedy accruing upon any Event of Default shall impair such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein.

 

(b) Any insured depository institution which shall be a holder of this Subordinated Note or which otherwise shall have any beneficial ownership interest in this Subordinated Note shall, by its acceptance of such Note (or beneficial interest therein), be deemed to have waived any right of offset with respect to the indebtedness evidenced thereby.

 

19. No Sinking Fund; Convertibility.  This Subordinated Note is not entitled to the benefit of any sinking fund. This Subordinated Note is not convertible into or exchangeable for any of the equity securities, other securities or assets of the Company or any subsidiary.

 

20. No Recourse Against Others.  No recourse under or upon any obligation, covenant or agreement contained in this Subordinated Note, or for any claim based thereon or otherwise in respect thereof, will be had against any past, present or future shareholder, employee, officer, or director, as such, of the Company or of any predecessor or successor, either directly or through the Company or any predecessor or successor, under any rate of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of this Subordinated Note by the holder hereof and as part of the consideration for the issuance of this Subordinated Note.

 

  

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21. Notices.  All notices to the Company under this Subordinated Note shall be in writing and addressed to the Company at 400 East Thomas Street, Hammond, Louisiana 70401, Attn: Alton B. Lewis, Jr., President and Chief Executive Officer, or to such other address as the Company may notify to the holder of this Subordinated Note (the “Payment Office”).  All notices to the Noteholders shall be in writing and sent by first-class mail to each Noteholder at his or its address as set forth in the Security Register.

 

22. Further Issues.  The Company may, without the consent of the holders of the Subordinated Notes, create and issue additional notes having the same terms and conditions of the Subordinated Notes (except for the Issue Date) so that such further notes shall be consolidated and form a single series with the Subordinated Notes.

 

23. Governing Law.  THIS SUBORDINATED NOTE WILL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF LOUISIANA AND WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF LOUISIANA WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF. THIS SUBORDINATED NOTE IS INTENDED TO MEET THE CRITERIA FOR QUALIFICATION OF THE OUTSTANDING PRINCIPAL AS TIER 2 CAPITAL UNDER THE REGULATORY GUIDELINES OF THE FEDERAL RESERVE, AND THE TERMS HEREOF SHALL BE INTERPRETED IN A MANNER TO SATISFY SUCH INTENT.

 

[Signature Page Follows]

  

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IN WITNESS WHEREOF, the undersigned has caused this Subordinated Note to be duly executed.

 

Dated: December 21, 2015

	  	
FIRST GUARANTY BANCSHARES, INC.

 

	  	  	  	  
	  	
By:

	 /s/ Alton B. Lewis, Jr.
	 	 	

	  	  	
Name:

	
Alton B. Lewis, Jr.

	  	  	
Title:

	
President and Chief Executive Officer

  

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ASSIGNMENT FORM

To assign this Subordinated Note, fill in the form below: (I) or (we) assign and transfer this Subordinated Note to:

 

___________________________________________________________________________________________

(Print or type assignee’s name, address and zip code)

 

___________________________________________________________________________________________

(Insert assignee’s social security or tax I.D. No.)

and irrevocably appoint _______________________ agent to transfer this Subordinated Note on the books of the Company. The agent may substitute another to act for him.

Date:                                                                        Your signature:   __________________________                                                                       

(Sign exactly as your name appears on the face of this Subordinated Note)

Tax Identification No:    ___________________________                                                                      

Signature Guarantee: ____________________________________________________________________________                                                                                                                                         

(Signatures must be guaranteed by an eligible guarantor institution (banks, stockbroker’s, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to Exchange Act Rule 17Ad-15).

The undersigned certifies that it [is / is not] an Affiliate of the Company and that, to its knowledge, the proposed transferee [is / is not] an Affiliate of the Company.

 

In connection with any transfer or exchange of this Subordinated Note occurring prior to the date that is one year after the later of the date of original issuance of this Subordinated Note and the last date, if any, on which this Subordinated Note was owned by the Company or any Affiliate of the Company, the undersigned confirms that this Subordinated Note is being:

 

CHECK ONE BOX BELOW:

 

	
  [  ]

	 	
 (1)

	
        acquired for the undersigned’s own account, without transfer;

 

	
  [  ]

	
(2)

	
transferred to the Company;

 

	
  [  ]

	
(3)

	
transferred in accordance and in compliance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”);

 

	
  [  ]

	
(4)

	
transferred under an effective registration statement under the Securities Act;

 

	
  [  ]

	
(5)

	
transferred in accordance with and in compliance with Regulation S under the Securities Act;

 

  

12

  

	
  [  ]

	
(6)

	
transferred to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) or an “accredited investor” (as defined in Rule 501(a)(4) under the Securities Act), that has furnished a signed letter containing certain representation’s and agreements; or

 

	
  [  ]

	
(7)

	
transferred in accordance with another available exemption from the registration requirements of the Securities Act of 1933, as amended.

 

Unless one of the boxes is checked, the Company will refuse to register this Subordinated Note in the name of any person other than the registered holder thereof; provided, however, that if box (5), (6) or (7) is checked, the Company may require, prior to registering any such transfer of this Subordinated Note, in its sole discretion, such legal opinions, certifications and other information as the Company may reasonably request to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act such as the exemption provided by Rule 144 under such Act.

 

Signature: ______________________________                                                                         

Signature Guarantee: ___________________________________                                                                                                                                       

(Signatures must be guaranteed by an eligible guarantor institution (banks, stockbroker’s, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to Exchange Act Rule 17Ad-l5).

 

TO BE COMPLETED BY PURCHASER IF BOX (1) OR (3) ABOVE IS CHECKED.

 

The undersigned represents and warrants that it is purchasing this Subordinated Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

 

Date: ____________________________   Signature:  _______________________                                                                        

 

  

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