Document:

Exhibit 10.1

 

DISTRIBUTION AGREEMENT

 

THIS DISTRIBUTION
AGREEMENT (this “Agreement”), made effective as of May 12, 2016 (the “Effective Date”),
is by and between Hard Rock Solutions, LLC, a Utah limited liability company, whose address is 1583 East. 1700 South, Vernal, Utah
84078 (“Supplier”), and Drilling Tools International, Inc., a Louisiana Corporation, whose address is 3701 Briarpark
Dr., Suite 150, Houston, TX 77042 (“Distributor”) (Supplier and Distributor being sometimes hereinafter referred
to individually as a “Party” and collectively as the “Parties”).

 

W I T N E S S E T H:

 

WHEREAS, Supplier has
developed and owns solely and exclusively a product more particularly described in Exhibit “A” hereto, referred
to as the “Drill N Ream” (the “DNR”);

 

WHEREAS, Supplier desires
to engage Distributor as the exclusive distributor of DNR units (the “DNR Units”) in the "Territory,"
as that term is defined in Exhibit “B” hereto; and

 

WHEREAS, Distributor
desires to accept such engagement; and

 

WHEREAS, the Parties
are willing to agree to the terms and conditions hereof with respect to such engagement and rights.

 

NOW, THEREFORE, for
and in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties agree as follows:

 

		1.	Distribution.

 

a.           Supplier
hereby grants to Distributor, and, subject to the provisions set forth herein, Distributor hereby acquires from Supplier, the exclusive
right to distribute and market, by lease or rental, and to provide certain limited servicing thereof for, all DNR Units in the
Territory. For the avoidance of doubt, Distributor shall not have the right to sell the DNR Units within or outside the Territory,
except in connection with an assignment of this Agreement as allowed hereby. The rights granted herein shall apply to all future
enhancements, revisions, and new versions of the DNR Units.

 

     

     

    

 

b.           Distributor
shall use commercially reasonable efforts to lease or rent DNR Units in the Territory.

 

c.           Subject
to the provisions of this Agreement, Distributor may:

 

		i.	Market DNR Units in any manner it sees fit, within its
sole and absolute discretion;

 

		ii.	Invoice, collect and retain payments from its customers,
subject to obligations imposed hereby to pay Supplier a portion of same; and

 

		iii.	Use one or more agents or sub-distributors in the exercise
of its rights hereunder. All sub-agents, or sub-distributors, if utilized, will be required to adhere to the same quality standards
and deploy procedures as are required of Distributor by Supplier hereunder.

 

d.           Upon
receipt of written notice from Distributor of its desire to market and distribute any of Supplier’s products other than the
DNR (the “Other Products”), and provided Distributor is in compliance with the provisions of this Agreement,
Supplier will provide Distributor with a period of six (6) months in which to evaluate the feasibility of distributing such Other
Products, so long as the right to do so does not violate any other agreement to which Supplier is now a party. The decision to
grant Distributor the right to distribute any of the Other Products shall be made by Supplier in its sole, reasonable discretion.

 

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		2.	Supply; Minimum Requirement.

 

a.           Supplier
shall sell to Distributor, and Distributor shall purchase from Supplier, the DNR Units ordered by Distributor subject to, and in
accordance with, the terms of this Agreement. The number of DNR Units ordered by Distributor shall be as set forth in Exhibit
“C” hereto.

 

b.           Supplier
shall deliver to Distributor the number of DNR Units within the time periods set forth below after an order is given by Distributor
to Supplier, subject to prior pending orders from Distributor to Supplier (the “Delivery Deadline”) based on
the size of the order as follows:

 

		i.	30 or less of the 475 DNR Units – 30-45 days;

		ii.	20 or less of the 675 DNR Units – 30-45 days; and

		iii.	10 or less of the 800 DNR Units – 45-60 days.

 

If Supplier fails to deliver any number
of DNR Units specified above by the Delivery Deadline, the purchase price for each Unit shall be reduced by ten percent (10%) for
each week by which delivery of same is delayed beyond the deadline, except to the extent such delay is caused by force majeure.
In the event Distributor places an order for a number of DNR Units in excess of the amounts specified above, the Parties shall,
in good faith, agree on a reasonable delivery period. In the event Distributor markets any Other Products, the Parties shall, in
good faith, agree on the amount or amounts of each such Other Product to be delivered by Supplier by the Delivery Deadline.

 

c.           Delivery
of all DNR Units, either to Distributor or Supplier, shall be at Distributor’s sole cost, risk and expense, F.O.B. (free
on board) the carrier of Distributor’s choosing. Title to and risk of loss of the DNR Units shall be Distributor’s
upon delivery of possession of the DNR Units to Distributor or Distributor’s common carrier, but otherwise on Supplier. Distributor
shall bear all expenses of demurrage, transportation and storage charges for the DNR Units from and after such delivery by Supplier,
including without limitation, expenses while awaiting loading at point of embarkation or debarkation.

 

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d.           After
Distributor purchases DNR Units, Supplier shall provide additional Units (“Back-Up Units”) reasonably requested
by Distributor until such time as Supplier shall have provided to Distributor all Units ordered by Distributor for 2016. Notwithstanding
the foregoing to the contrary, Supplier shall only be required to provide Back-Up Units to the extent of any existing Supplier
Unit inventory, and Supplier’s obligation to provide Back-Up Units shall be subject to Supplier’s reasonable good faith
evaluation of Distributor’s need for such Back-Up Units. Back-Up Units shall initially be provided at no initial cost to
Distributor (other than the cost of shipping and delivery); provided, however, if a Back-Up Unit is used by Distributor
or an end user more than two times, Distributor shall purchase such Back-Up Unit at the stated prices for the applicable DNR Unit
less the prior Back-Up Unit Rental Payment, as such term is hereinafter defined. For the first two times a Back-Up Unit is rented
by Distributor, Distributor shall pay Supplier 50% of the rental fee that it has invoiced to its customer within the same time
frame as other Royalty Payments are made from Distributor to Supplier.

 

e.           In
order for Distributor to maintain the benefits of exclusivity conferred by this Agreement on the Distributor, Distributor must
submit purchase Orders for 2016 as provided for on Exhibit “C” and must achieve the Run Rate utilization percentages
set forth on Exhibit “C”. As used herein, “Run Rate” shall mean the rental rate per foot drilled
charged by Distributor for rental of the DNR Units.

 

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		3.	Pricing to Distributor and Terms.

 

a.           Distributor
shall pay Supplier the amounts provided for in Exhibit “D” hereto for the purchase of DNR Units from Supplier,
subject to possible adjustment based on Run Rates as set forth on Exhibit “E”. Distributor shall pay Supplier
the purchase price for each such Unit within forty five (45) days from invoice date.

 

b.           In
addition to the amounts to be paid by Distributor pursuant to 3.a. above, Distributor shall pay Supplier eight percent (8%) of
the gross rental revenues due to Distributor from its customers (the “Rental Revenue Percentage”), excluding
revenues attributable to service fees, repair fees and standby charges, taxes, and similar charges collected from such customers,
as provided for in Exhibit “E” hereto (the “Royalty Payments”). Distributor shall provide Supplier
at the time of invoicing, copies of every invoice and written statement of charges for DNR Units it sends to its customers plus
such other written evidence reasonably requested by Supplier as to the determination of the amount of Royalty Payments.

 

c.           Within
a reasonable time after invoicing its customers, but on a monthly basis and usually at the end of the monthly billing cycle, Distributor
shall issue a credit to Supplier equal to the Rental Revenue Percentage of the invoiced amount, less applicable taxes, as documented
by actual invoices. No sooner than the seventy-fifth (75th) day, but no later than the ninetieth (90th) day, after Distributor
invoices its customers, Distributor shall be obligated to pay Supplier by wire transfer or a mutually agreed alternative the amount
of the Royalty Payments for the related invoices.

 

d.           In
the event Distributor does not collect, and elects to write off any amounts invoiced to its customers, the amount of the Royalty
Payments associated with such written off accounts receivable may be offset against future Royalty Payments due to Supplier hereunder
provided that Distributor provides bona fide written evidence of such amounts written off.

 

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e.           In
the event any of Distributor’s customers should make payment to Supplier for the rental of any DNR Units by Distributor,
Supplier shall promptly deliver such funds to Distributor.

 

f.            Upon
at least seven (7) days prior written notice to Distributor, Supplier shall have the right, at its sole cost and expense, to audit
the books and records of Distributor to verify the amount of the Royalty Payments due to Supplier. In such event, Distributor shall
reasonably cooperate with Supplier and provide Supplier such information as reasonably requested by Supplier. In the event any
such audit results in a determination of a shortfall or overages, as the case may be, in the correct amount of Royalty Payments
to be paid to Supplier, Distributor shall pay Supplier the amount of such shortfall, or Supplier shall pay to Distributor (or credit
against future payments due from Distributor) the amount of such overage.

 

4.             Pricing
to Distributor’s Customers. The range of daily rental, per foot, or per well amounts to be charged by Distributor to
its customers for lease or rental of DNR Units shall be determined by the size of the DNR tool, the conditions of the geographic
market where the tools are deployed, wear expectations and customer acceptance. Distributor shall use commercially reasonable efforts
to market the DNR Units at the greatest reasonable price to the customer taking into account prevailing market conditions. Distributor
shall consult with Supplier regarding rates to be charged by Distributor to its customers, but Distributor shall make the final
determination on prices offered to Distributor’s customers, so long as such determination is reasonable. Distributor may
change the rental charges to its customers from time to time; provided, however, that in no event will the rental charges
be less than twenty percent (20%) of the per foot prices set forth on Exhibit “E” attached hereto without Supplier’s
prior written consent, such consent not to be unreasonably withheld.

 

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		5.	Service. The DNR Units shall be serviced as follows:

 

		a.	Distributor will have the right to provide only basic inspection
and connection repair (“Level 1 Service”); and

 

		b.	Supplier will provide cutter replacement (“Level
2 Service”) and refurbishing (“Level 3 Service”).

 

For Level 2 and Level 3 Service by Supplier,
Distributor shall ship Units to Supplier at Supplier’s Vernal, Utah location at Distributor’s sole cost, risk and expense,
and Supplier shall ship tools back to Distributor’s locations, at Distributor’s sole cost, risk and expense. Supplier
shall return ship to Distributor all Units shipped for Service no later than seven (7) days after receipt of such Units by Supplier.
Notwithstanding the foregoing to the contrary, Supplier shall not be obligated to return to Distributor more than ten (10) DNR
Units shipped for Level 2 Service nor more than five (5) DNR Units shipped for Level 3 Service in any consecutive seven (7) day
period. In the event Distributor requests Supplier to perform Level 2 Service or Level 3 Service in a greater amount of Units than
set forth in the previous sentence during any particular week, Supplier shall utilize commercially reasonable efforts to provide
such Level 2 Service or Level 3 Service on a timely basis. Supplier shall return ship to Distributor by long-haul freight, unless
Distributor gives Supplier a written directive to ship by a more expeditious means, which Supplier shall accommodate. Supplier
shall quote Level 2 Service and 3 Service charges to Distributor for each Unit after the Unit is evaluated by Supplier at its location,
which charge shall be ten percent (10%) of the price of the DNR Unit to Distributor, unless exceptional wear is noted and Distributor
is notified in advance of exceptional service requirements. For 2017 and thereafter, prices for servicing by Supplier shall be
reviewed from time to time but not less than annually and the Parties shall conduct good faith discussions and agree on a price
taking into account direct labor and material costs as well as reasonable industry standards. If a DNR Unit needs servicing, Distributor
shall have the option to decline the servicing of any such DNR Unit after receiving a quote from Supplier and in such event, the
Unit shall either be returned to Supplier by Distributor or destroyed by Distributor, in which event, Distributor shall send written
notice and reasonable evidence thereof to Supplier.

 

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		6.	Term.

 

a.           Subject
to the Parties’ rights to terminate provided herein, this Agreement shall remain in effect for a period of five (5) years
commencing on the Effective Date. Provided Distributor is not in material non-compliance with the provisions of this Agreement,
Distributor may elect to extend the Agreement for consecutive 5-year periods by giving Supplier written notice thereof no later
than the thirtieth (30th) day before the end of the initial 5-year term or 5-year extension then in effect. The initial 5-year
term and each such extension of this Agreement shall be collectively referred to hereinafter as the “Term.”

 

b.           Notwithstanding
the foregoing to the contrary, this Agreement may be terminated before the end of the Term, but only as expressly provided for
herein.

 

		7.	Intellectual Property.

 

a.           Supplier
grants to Distributor the exclusive right to use in the Territory in relation to the promotion and marketing of the DNR Units Supplier’s
trademarks, details of which are in Exhibit “F” hereto, and any other trademarks used by Supplier in relation
to the DNR Units at any time during the Term (the “Trademarks”) and any patent, copyright, design right or other
Intellectual Property rights of Supplier as more fully described on Exhibit “F” (collectively, including Trademarks,
“Intellectual Property”), to the extent beneficial to Distributor in connection with the performance of its
duties or the exercise of its rights under this Agreement. Supplier shall have sole approval over Distributor’s use of Supplier’s
Intellectual Property in such promotion and marketing materials.

 

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		b.	Distributor shall not:

 

		i.	Modify the DNR Units or their packaging; or

 

		ii.	Apply for or register as a trademark or as a domain name
in the Territory or elsewhere any name or mark which is the same as or similar to any of the Trademarks or any domain name of
the Supplier.

 

Notwithstanding anything to the contrary
contained herein, Distributor shall have the right to market and advertise Units as Distributor’s Units or products, without
reference to Supplier other than as required by law or as necessary to protect Supplier’s Intellectual Property.

 

c.           Except
as provided in this Agreement, Distributor shall have no rights in respect of any trade names or Trademarks used by Supplier in
relation to the DNR Units or of the goodwill associated with them or any other Intellectual Property of Supplier in respect of
the DNR Units.

 

d.           Distributor
shall promptly notify Supplier of any actual or threatened infringement in the Territory of any of the Trademarks or any other
Intellectual Property of Supplier in respect of the DNR Units within Distributor’s knowledge, and of any claim or threatened
claim by any third party that the importation of the DNR Units into the Territory or their lease or rental in the Territory infringes
the trademark or other intellectual property rights of any other Person. In the event of any such infringement or claim, Distributor
shall at the request and expense of Supplier take all steps reasonably necessary to assist Supplier in taking or resisting any
proceedings in relation to the infringement or claim.

 

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e.           Supplier
shall take all steps necessary to maintain the validity of the United States patents relating to the DNR (the “Patents”)
and all claims thereunder and its other Intellectual Property related to the DNR and to fully protect and preserve all Supplier
Intellectual Property relating to the DNR.

 

		8.	Warranties.

 

		a.	Each Party warrants to the other that:

 

		i.	It has the authority to enter into this Agreement;

 

		ii.	The signatory to this Agreement for and on behalf of the
warranting Party is authorized and fully empowered to execute this Agreement on the Party’s behalf;

 

		iii.	The entry into and performance of this Agreement by the
warranting Party will not breach any contractual or other obligation owed by the warranting Party to any other Person, any rights
of any other Person or any other legal provision;

 

		iv.	The entry into and performance of this Agreement by the
warranting Party require no governmental or other approval, or if any such approval is required, it has been obtained; and

 

		v.	The warranting Party will at all times during the Term
comply with the terms of, and maintain in force, any necessary governmental or other approvals, consents, notifications, registrations
or other legal requirements for the performance by that Party of its obligations under this Agreement.

 

		b.	Supplier warrants to Distributor the following:

 

		i.	Supplier has, and will maintain, the manufacturing capacity
to meet the supply needs of Distributor under this Agreement.

 

		ii.	Supplier at the time of delivery will have good title to
the DNR Units to be supplied under this Agreement.

 

		iii.	The DNR Units provided by Supplier under this Agreement
will comply with all specifications on Exhibit “A” hereto or as otherwise provided herein.

 

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		iv.	The DNR Units provided by Supplier under this Agreement
shall be free from defects in material and workmanship and comply with all health, safety and other legal requirements.

 

		v.	All servicing of Units by Supplier shall be performed in
a good and workmanlike manner.

 

		vi.	To Supplier’s knowledge, neither the acquisition,
importation, nor distribution by Distributor of the DNR Units acquired from Supplier under this Agreement will infringe the patent,
design, copyright, trademark or other intellectual property right of any other Person.

 

		vii.	Supplier’s patents relating to the DNR Units (the
“Patents”) have not been nor are they now involved in any interference, reissue, reexamination, or opposition proceeding.

 

		viii.	All of the Patents are currently in compliance with formal
legal requirements (including payment of filing, examination and maintenance fees and proofs of working or use) and are valid
and enforceable.

 

		ix.	To Supplier’s knowledge, there is no patent that
potentially interferes with any of the Patents nor any application for a patent that would potentially interfere with any of the
Patents.

 

		x.	To Supplier’s knowledge, no Patent is infringed or
has been challenged or threatened in any way, and none of the products manufactured or sold, nor any process or know-how used,
by Supplier infringes or is alleged to infringe any patent or other proprietary right of any other Person.

 

		xi.	All products made, used or sold under the Patents have
been marked with the proper patent notice.

 

		xii.	To the best of Supplier’s knowledge, there are no
products that compete with the DNR that Supplier is aware of or that Supplier has reason to be aware of except those identified
in Exhibit “G” hereto.

 

		xiii.	Supplier has previous disclosed to Distributor its Run
Rate history utilizing DNR Units from the period of June 2014 to April 2016.

 

		9.	Support and Training.

 

a.           In
order to assist Distributor with the development of its promotion and marketing materials, Supplier shall initially provide to
Distributor (for a reasonable period of time as determined in Supplier’s sole discretion), free of charge, such data and
information for Distributor’s brochures, catalogs, manuals and current promotional and advertising information concerning
the DNR Units. Supplier will promptly provide to Distributor free of charge all subsequent information, data, and operational knowledge
for the DNR that becomes available.

 

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b.           For
a period of sixty (60) days following the Effective Date, Supplier shall provide Distributor with reasonable technical support
for the DNR Units at no charge. Following expiration of the sixty (60) day period, Supplier shall have personnel available to answer
technical inquiries concerning the DNR Units, but if Distributor requests that Supplier’s technical support personnel travel,
Distributor shall pay Supplier a day rate plus reasonable out of pocket expenses incurred by Supplier for such services.

 

c.           Distributor
shall provide all field sales, city sales, local distribution and handling facilities in the Territory. On the Effective Date,
Supplier shall provide Distributor with a list of Supplier employees that Supplier deems eligible for hire by Distributor within
Distributor’s sole and absolute discretion as sales engineers, city sales and field sales representatives, and any other
employee that Supplier designates or recommends. Supplier may submit additional lists of Supplier employees which Supplier deems
appropriate for hire by Distributor within Distributor’s sole and absolute discretion. Any hiring of Supplier employees included
on any such list or lists shall not be considered a violation of the provisions of Paragraph 14.d of this Agreement.

 

		10.	Default.

 

		a.	Each of the following shall be considered an “Event
of Default” by Supplier:

 

		i.	The breach by Supplier of any material provision of this
Agreement, which is not remedied by Supplier within thirty (30) days after Distributor gives Supplier notice of the breach or
failure; and

 

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		ii.	The insolvency or bankruptcy of Supplier.

 

		b.	Each of the following shall be considered an “Event
of Default” by Distributor:

 

		i.	The breach by Distributor of any material provision of
this Agreement, which is not remedied by Distributor within thirty (30) days after Supplier gives Distributor notice of the breach
or failure; and

 

		ii.	The insolvency or bankruptcy of Distributor.

 

c.           Notwithstanding
the foregoing provisions of this Section 10, if the addressee of a notice of breach or failure is not reasonably able to remedy
any breach or failure which is identified in such notice through no fault of the addressee, the breach or failure shall not be
considered an Event of Default unless the addressee shall have failed to remedy such breach or failure within a reasonable time
for same, so long as the addressee shall have pursued such remedy continuously and with reasonable diligence.

 

d.           Neither
Party may bring any action against the other Party for any breach or failure which does not constitute an Event of Default by the
latter.

 

e.           In
case of an Event of Default by a Party (the “Defaulting Party”), the other Party, in addition to any and all
other rights and remedies such other Party may have, either at law or in equity, against the Defaulting Party, may terminate this
Agreement by giving written notice to the Defaulting Party, indicating the notifying Party’s intent to terminate, stating
the effective date of the termination (which must be at least thirty (30) days after the giving of such notice) and identifying
the grounds for termination.

 

		11.	Effect of Termination.

 

a.           The
provisions of this Section 11 shall take effect upon the earlier of the end of the Term or termination of this Agreement as otherwise
provided for herein.

 

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b.           Supplier
shall have the option to repurchase from Distributor, subject to all existing customer obligations, all, but not less than all,
of the DNR Units then owned by Distributor at their current fair market value (the “FMV”), subject to the following
provisions:

 

		i.	Transportation shall be at Supplier’s sole cost,
risk and expense; and

 

		ii.	Distributor may rent or lease Units to the extent it has
accepted orders from customers prior to the date of termination, or in respect of which the Supplier does not exercise its option
to repurchase.

 

Supplier may exercise its option to repurchase
only by giving Distributor written notice of such exercise no later than thirty (30) days after termination. If the Parties cannot
agree on the FMV of the DNR Units to be repurchased within thirty (30) days, they shall designate an appraiser (the “Appraiser”)
to determine the FMV. Such Appraiser shall be designated within thirty (30) days following the expiration of such thirty (30) day
period. If the Parties cannot agree on an Appraiser within such thirty (30) day period, the Parties shall contact the American
Arbitration Association which shall, after meeting with the Parties, and pursuant to reasonable judgment and its rules of Arbitration,
appoint the Appraiser. The Appraiser selected pursuant to the provisions hereof shall be a qualified person with prior experience
in the valuation of energy services equipment and that is not an affiliate of either Party. After the determination of the Appraiser,
the Distributor shall submit its proposed FMV (the “Distributor’s Value”) and the Supplier shall submit
its proposed FMV (the “Supplier’s Value”). The Appraiser shall submit its determination of the FMV to
the Parties within thirty (30) days of the date of its selection; provided, however, that the Appraiser must select either
the Distributor’s Value or the Supplier’s Value as the final FMV. The determination of the FMV in accordance with the
foregoing procedure shall be final and binding upon the Parties. If Supplier does not exercise the option provided for in this
paragraph, Distributor shall be entitled to continue the lease or rental of the DNR Units which it then owns, or sell the DNR Units
in connection with an assignment of this Agreement as allowed hereby.

 

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c.           Outstanding
unpaid invoices rendered by Supplier shall become immediately payable by Distributor, and invoices in respect of goods ordered
prior to termination, but for which an invoice has not been submitted, shall be payable immediately upon submission of the invoice.

 

d.           Distributor
shall cease to promote, market or advertise Units or to make any use of the Trademarks or any other Intellectual Property of Supplier
except for the purpose of selling, renting or leasing any DNR Units then in Distributor’s inventory.

 

e.           Termination
shall not affect either Party’s accrued rights, remedies or liabilities under this Agreement or the coming into effect or
continuation of any provision of this Agreement that is expressly or by implication intended to come into effect or continue after
termination, including but not limited to Sections 13, 14 (for the time set forth specifically therein), 19, 20 and 22 such provisions
surviving the termination of this Agreement for a period of five (5) years. If Supplier elects to purchase the DNR Units as provided
for hereinabove, the provisions of Section 11.d. shall apply. If Supplier does not elect to repurchase the DNR Units, the provisions
hereof facilitating the lease, rental or sale of such Units, including but not limited to provisions pertaining to servicing and
intellectual property, shall continue in force and effect with respect to such Units.

 

		12.	Force Majeure.

 

a.           “Force
majeure” means war, emergency, accident, fire, earthquake, flood, storm, industrial strike or other impediment (i) which
is beyond the affected Party’s control and (ii) which the affected Party could not reasonably be expected to have avoided
or overcome.

 

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b.           Subject
to the Party’s compliance with the notice requirements of paragraph c. immediately below, other than each Party’s payment
obligations hereunder, a Party shall not be in breach of this Agreement or otherwise liable to the other Party by reason of any
delay in performance or any non-performance of any of its obligations under this Agreement to the extent that the delay or non-performance
is due to any force majeure, and the time for performance of such obligation shall be extended by the duration of the event of
force majeure.

 

c.           If
an event of force majeure occurs which has affected or may affect the performance of a Party’s obligation under this
Agreement, such Party shall notify the other Party within a reasonable time as to the nature and extent of the circumstances in
question and their effect on the notifying party’s ability to perform.

 

d.           If
the performance by either Party of any of its obligations under this Agreement is prevented or delayed by force majeure for
a continuous period in excess of three (3) months, the other Party may terminate this Agreement by giving written notice to the
Party affected by the force majeure, such termination to be effective on a date stated in such notice no earlier that the (30th)
days after the date such notice is given.

 

		13.	Indemnity.

 

a.           Distributor
hereby releases Supplier and its Affiliates, owners, officers, directors, managers, employees, agents, contractors (other than
Distributor), subcontractors and attorneys (collectively, the “Supplier Group”) and shall indemnify the Supplier
Group, hold the Supplier Group harmless, and defend the Supplier Group against any claim, injury, action, loss, liability, penalty,
charge or damage, and all costs and expenses of all actions, suits, proceedings, demands, assessments, claims and judgments (including
without limitation reasonable attorney, accountant, engineer, consulting and expert fees), whether direct, pending, threatened,
contingent or otherwise, suffered or incurred by any of the Supplier Group or any other party, including the “Distributor
Group,” as that term is hereinafter defined, arising out of, relating to, or resulting in whole or in part from, (i) the
breach of any warranty herein by Distributor; (ii) the failure by Distributor to perform, either in whole or in part, any of its
obligations hereunder, or (iii) any breach of duty by any of the Distributor Group, regardless of whether they arise either
in whole or in part out of the indemnitee's own negligence.

 

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b.           Supplier
hereby releases Distributor and its Affiliates, owners, officers, directors, managers, employees, agents, contractors (other than
Supplier), subcontractors and attorneys (collectively, the “Distributor Group”) and shall indemnify the Distributor
Group, hold the Distributor Group harmless, and defend the Distributor Group, against any claim, injury, action, loss, liability,
penalty, charge or damage, and all costs and expenses of all actions, suits, proceedings, demands, assessments, claims and judgments
(including without limitation reasonable attorney, accountant, engineer, consulting and expert fees), whether direct, pending,
threatened, contingent or otherwise, suffered or incurred by any of the Distributor Group or any other party, including the Supplier
Group, arising out of, relating to, or resulting in whole or in part from, (i) the breach of any warranty herein by Supplier; (ii)
the failure by Supplier to perform, either in whole or in part, any of its obligations hereunder, or (iii) any breach of duty by
any of the Supplier Group, regardless of whether they arise either in whole or in part out of the indemnitee's own negligence.

 

		c.	Neither Party shall be liable for exemplary damages.

 

		14.	Non-Disclosure, Non-Compete, and Non-Solicitation.

 

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a.           Distributor
understands and agrees that the DNR Units and accompanying technology constitute highly sensitive, confidential, trade-secret technology
and information of a proprietary nature, owned and claimed exclusively by Supplier, and that the disclosure or dissemination of
such information reasonably designated in writing by Supplier to be confidential (“Confidential Information”)
to any Person other than the Distributor Group would result in irreparable injury, loss, and damage to Supplier. Distributor will
keep inviolate and secret and will not directly, indirectly, or otherwise use, disseminate, disclose, publish or make known in
any other manner to any Person any Confidential Information, without the written consent of Supplier, except as is consistent with
the exercise of its rights as otherwise provided for in this Agreement. Should any Person seek to legally compel disclosure of
Confidential Information by Distributor, or by anyone to whom Distributor has transmitted any Confidential Information, by oral
question, interrogatory, request for information or documents, subpoena, civil investigative demand or otherwise, Distributor shall
provide Supplier with prompt written notice sufficient to enable a reasonable attempt by Supplier to obtain a protective order
or other appropriate remedy, including participation in any proceeding to the extent necessary to protect the Confidential Information,
which at Supplier’s request Distributor will use its best efforts to permit. In any event, Distributor shall furnish only
that portion of the Confidential Information which is legally required and will use its best efforts to obtain reliable assurance
that confidential treatment will be accorded the Confidential Information.

 

		b.	Other than as set forth below, Supplier shall not:

 

		i.	engage any Person other than Distributor in the sale, lease,
rental or service of DNR Units in the Territory; or

 

		ii.	Supply (either by itself or through an agent) any DNR Units
to any Person in the Territory other than Distributor;

 

		iii.	Supply any DNR Units to any Person other than Distributor
within the Territory or outside the Territory if Supplier knows, or has reason to believe, that such Units are intended for sale,
lease, rental or other distribution in the Territory; or

 

    	 	18	 

     

    

 

		iv.	Develop or market any product which competes with, or makes
obsolete, the DNR tool without offering these products to Distributor as provided for herein.

 

		c.	Distributor shall not:

 

		i.	Seek customers for, establish a warehouse or distribution
outlet for, or actively market, the sale, lease, rental or other distribution of any DNR Units outside the Territory;

 

		ii.	Sell, lease, rent or otherwise distribute to any Person
in the Territory (either by itself or through an agent) any products that compete with the DNR Units; or

 

		iii.	Sell, lease, rent or otherwise distribute (either by itself
or through an agent) any DNR Units to any Person outside the Territory or to any Person in the Territory if Distributor knows
or has reason to believe that the Person intends to sell, lease, rent or otherwise distribute the Units outside the Territory.

 

The Parties
understand, acknowledge and agree that (x) Supplier has and will continue to have a contractual obligation with QEP Resources,
Inc. (“QEP”), which may include the sale, lease or rental by Supplier to QEP of DNR Units for use by QEP on
its rigs within the Territory; and (y) the sale or rental by Supplier of DNR Units will not constitute a breach of this Agreement;
provided, however that any future sales or rentals by Supplier to QEP of DNR Units are required to be solely for the use by QEP
on its own drilling rigs or drilling rigs for which it is the record operator.

 

d.           Subject
to the provisions of Paragraph 9.c of this Agreement, each Party shall not, and shall cause its respective Affiliates not to, directly
or indirectly, hire or cause to be hired, recruit, solicit for employment or otherwise contract for the services of an employee
of the other Party; provided, however, that general solicitations, including solicitations by search firms, recruiters or
other placement specialists (in each case that are not specifically directed at the employees of the Parties) shall not constitute
solicitations for employment in violation hereof, so long as the Party does not hire any employee of the other Party so solicited;
provided, further, that the foregoing restrictions shall not apply with respect to any such employee that is no longer,
and has not been within the prior six (6) months, an employee of the other Party at the time of hire, recruitment or solicitation.

 

    	 	19	 

     

    

 

e.           The
provisions of this Section 14 shall be binding not only on the Parties, but also on their Affiliates and the owners, officers,
directors, managers, employees, agents, contractors, subcontractors of the Parties and their Affiliates.

 

f.            The
obligations imposed by this Section 14 shall survive the termination of this Agreement for two (2) years; provided, Section 14(a)
shall survive the termination of this Agreement for five (5) years.

 

15.         Notice.
Any notice or payment provided for in this Agreement shall be deemed given only when actually delivered by courier receipted delivery
at the recipient's addresses provided in the first Paragraph of this Agreement. Either Party may change its address for notice
or payment by giving notice of such change in accordance with this Agreement, which change shall become effective thirty (30) days
after such notice is given.

 

16.         No
Partnership or Agency. Nothing in this Agreement shall (i) be deemed to constitute a partnership between the Parties, (ii)
constitute either Party the agent of the other for any purpose, or (iii) entitle either Party to commit or bind the other in any
manner.

 

17.         Non-Assignability;
Binding Effect. Without the consent of the non-assigning Party, which consent shall not be unreasonably withheld, the rights
and obligations under this Agreement may not be assigned or otherwise transferred except (i) as part of the sale of all or substantially
all of the assets of the assignor, (ii) as collateral for financing, or (iii) to an Affiliate. This Agreement shall inure to the
benefit of the Parties and, except to the extent assignment is prohibited, their successors and assigns.

 

    	 	20	 

     

    

 

18.         Entire
Agreement; Modification. This Agreement and the Exhibits attached hereto constitute the entire and fully integrated agreement
between the Parties with respect to the subject matter hereof and supersedes and replaces all prior agreements regarding such subject
matter. This Agreement may not be modified or amended except by a writing signed by the Party against whom such modification or
amendment is to be enforced.

 

19.         Choice
of Law and Venue. This Agreement shall be governed and construed in accordance with the laws of the State of Texas, without
regard to any conflicts-of-law rule or principle that would require application of the laws of another jurisdiction. Venue for
any dispute or controversy under this agreement shall be mandatory in Harris County, Texas.

 

20.         Attorneys’
Fees. Should any litigation be commenced between the Parties arising out of this Agreement, the transactions contemplated hereby,
or the rights and duties in relation thereto, the Party prevailing in such litigation shall be entitled, in addition to such other
relief as may be granted, to a reasonable sum as and for its reasonable attorneys’ fees in such litigation, which sum shall
be determined by the court in such litigation.

 

21.         Caption
Headings. All captions set forth in this Agreement are inserted for convenience of reference only and shall not be deemed a
part of this Agreement, nor shall they control or in any way affect the construction, interpretation, or enforcement of this Agreement
or any provision hereof or be deemed indicative of the intent of either Party.

 

22.         Severability.
Any provision of this Agreement prohibited or rendered unenforceable by any applicable law or court of any jurisdiction shall as
to such jurisdiction be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any such jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.

 

    	 	21	 

     

    

 

23.         Ethics;
Conflicts of Interest. Distributor hereby agrees not to engage in any conduct, which would constitute a violation of any Federal
law of the United States or any law applicable in the Territory, including, but not limited to, the Anti-Bribery and Books &
Records Provision of The Foreign Corrupt Practices Act 15 U.S.C. §§ 78m, 78dd, and 78ff. Distributor further agrees that
it will not, in the course of fulfilling its duties under this Agreement, engage in any conduct which would violate or contradict
any state or local law, including, but not limited to, any law applicable to the Territory.

 

24.         Exhibits.
Attached hereto and incorporated herein by reference are the following Exhibits:

 

Exhibit “A” –
DNR Description

Exhibit “B” –
Definition of Territory

Exhibit “C” –
Purchase of DNR Units

Exhibit “D” –
Transfer/Sale Pricing

Exhibit “E” –
Run Rate and Rental Revenue Percentage

Exhibit “F” –
Trademarks

Exhibit “G” –
Owners and Competing Products

 

25.         Signatures.
This Agreement may be executed in multiple counterparts, which when taken together shall constitute a single agreement. Facsimile,
PDF, .jpeg and other electronic representations of signatures shall have the dignity, force and effect of an original. This Agreement
shall not be binding on any Party signing same unless and until all Parties named herein have signed same.

 

26.         RELIANCE
DISCLAIMER. EACH PARTY confirmS and agreeS that, IN DECIDING WHETHER TO SIGN
THIS AGREEMENT, IT has NOT RELIED ON ANY
STATEMENT OR REPRESENTATION by THE OTHER PARTY or anyONE ACTING ON BEHALF OF SUCH OTHER PARTY RELATED TO THE SUBJECT MATTER
OF THIS AGREEMENT THAT IS NOT IN THIS AGREEMENT.

 

    	 	22	 

     

    

 

27.         Distributor
Commissions. In the event Distributor refers a customer or potential customer to Supplier and Supplier is able to sell or rent
DNR Units to such customer within the Rocky Mountain States, then in such event, Supplier shall pay Distributor 8% of the gross
rental revenues due to Supplier from such customer (the “Supplier Rental Revenue Percentage”) excluding revenues
attributable to service and repair fees from Supplier and any standby charges (the “Supplier Royalty Payments”).
Supplier shall provide Distributor with written evidence as to the determination of the amount of Supplier Royalty Payments and
such other evidence as Distributor reasonably requests. The Parties agree that the procedures described in Section 3(c), 3(d),
and 3(e) with respect to credits from paid invoices and refunds thereof shall apply to the Supplier Royalty Payments.

 

SIGNATURE PAGE FOLLOWS

 

    	 	23	 

     

    

 

EXECUTED effective as of the Effective
Date.

 

	 	SUPPLIER:
	 	 
	 	HARD ROCK SOLUTIONS, LLC
	 	 
	 	/s/ Troy Meier
	 	Troy Meier, President and CEO
	 	 
	 	DISTRIBUTOR:
	 	 
	 	DRILLING TOOLS INTERNATIONAL, INC.
	 	 
	 	/s/ Wayne Prejean
	 	Wayne Prejean, President/CEO

 

    	 	24	 

     

    

 

Exhibit “A”

TO

DISTRIBUTION AGREEMENT

 

Description of DNR

 

 

 

    	 	25	 

     

    

 

 

 

    	 	26	 

     

    

 

EXHIBIT “B”

TO

DISTRIBUTION AGREEMENT

 

Definition of Territory

 

The “Territory”
is defined as Canada -Land and Offshore, United States- Land and Offshore (excluding Washington, Montana, North Dakota, South Dakota,
Idaho, Utah, Nevada, Colorado, Wyoming, and Nebraska, collectively referred to as the “Rocky Mountain States”) and
all Offshore operations in North America (including, but not limited to the North Pacific, North Atlantic, Gulf of Mexico and the
Caribbean).

 

Notwithstanding the
foregoing to the contrary, if Distributor and Supplier reach an agreement for the purchase by Distributor of all of Supplier’s
then existing fleet of DNR Units, the rights granted Distributor in this Agreement with respect to the Territory shall also apply
to the Rocky Mountain States, which shall thereafter be considered for the purposes of this Agreement as included in the Territory.

 

    	 	27	 

     

    

 

EXHIBIT “C”

TO

DISTRIBUTION AGREEMENT

 

Purchase of DNR Units

 

Other than the First Order, Second Order
and Third Order as set forth hereinbelow, Distributor shall have no obligation to purchase any DNR Units for which it has not issued
a purchase order. However, in order to maintain its exclusive rights in the Territory, Supplier must satisfy the following requirements
imposed in this Exhibit.

 

To maintain exclusivity, the minimum amount
to be purchased by Distributor for 2016 shall be an aggregate of $1,500,000 (the “Minimum Amount”), as follows:

 

First Order. Within seven
(7) days of execution of the Agreement, at least one-third (1/3) of the Minimum Amount of DNR Units.

 

Second Order. On or before
July 31, 2016, at least one-third (1/3) of the Minimum Amount of DNR Units. Notwithstanding the foregoing, if on such date the
“Rig Count,” as that term is hereinafter defined, in the Territory is at least five percent (5%) less than the “Initial
Rig Count,” as that term is hereinafter defined, the minimum for this order shall be reduced by a percentage equal to the
aforementioned percentage difference on such date.

 

Third Order. On or before
September 30, 2016, at least one-third (1/3) of the Minimum Amount of DNR Units. Notwithstanding the foregoing, if on such date
the Rig Count is in the Territory is at least five percent (5%) less than the Initial Rig Count, the minimum for the Second Order
shall be reduced by a percentage equal to the aforementioned percentage difference on such date, Notwithstanding anything contained
above, if the Second Order Rig Count in the Territory was less than the Initial Rig Count, and Distributor exercised its option
to reduce the minimum for the Second Order, and the Rig Count in the Territory for the Third Order Date is greater than the Second
Order Rig Count in the Territory, the amount of the Third Order minimum shall be increased by such percentage increase in the Rig
Count; provided, however, notwithstanding the foregoing, the minimum for the Third Order shall be such that the minimum
for all three Orders combined shall not exceed $1,500,000.

 

The Parties agree that the “Initial
Rig Count” means 255 rigs. Thereafter, “Rig Count” for the Territory shall be as published in the Tudor Pickering
Weekly Roundup or if such Report is no longer available, the Baker Hughes Report, and shall consist of the number of drilling rigs
performing horizontal drilling operations within the Territory during the applicable time period.

 

    	 	28	 

     

    

 

On the following dates, for Distributor
to maintain the benefits of exclusivity, the Run Rate utilization percentage must be equal to or greater than:

 

10.0% of the Annual Rig
Count in the Territory on June 30, 2016

12.5% of the Annual Rig Count in
the Territory on the last day of 2017

17.5% of the Annual Rig Count in
the Territory on the last day of 2018

22.5% of the Annual Rig Count calculated
on the last day of 2019

27.5% of the Annual Rig Count calculated
on the last day of 2020 and each year thereafter during the Term

 

    	 	29	 

     

    

 

EXHIBIT “D”

TO

DISTRIBUTION AGREEMENT

 

Transfer/Sale Pricing of DNR Units from
Supplier to Distributor (collectively, the “DNR Unit Prices”)

 

	475 DNR	$+++ per tool
	675 DNR	$+++ per tool
	800 DNR	$+++ per tool

 

The above stated prices are not inclusive
of any applicable sales tax, value added tax or any other similar tax.

 

Commencing January 1, 2017, Supplier shall
have the option within fifteen (15) days thereof, to show Distributor its actual costs of manufacturing the DNR Units (which shall
consist of direct material and labor costs) (collectively, the “Manufacturing Costs”) and shall furthermore have the
option within fifteen (15) days after each six (6) month time period thereafter to show Distributor the Manufacturing Costs during
that six (6) month time period and, if applicable, any changes in the Manufacturing Costs. The Parties agree that if the Manufacturing
Costs increase, the DNR Unit Prices may be increased prospectively at the option of Supplier by the same corresponding percentage
as that percentage increase in the then existing DNR Unit Prices from the most previous time period.

 

+++ This
information has been omitted in reliance upon Rule 24b-2 under the Securities Exchange Act of 1934, as amended, and has been filed
separately with the Securities and Exchange Commission.

 

    	 	30	 

     

    

 

EXHIBIT “E”

TO

DISTRIBUTION AGREEMENT

 

Run Rate and Rental Revenue Percentage

 

No Adjustment in Tool Sales Price nor Rental
Revenue Percentage as long as the Run Rate is between the Minimum and Maximum values below.

 

Rental Price Per Customer

 

	Tool Size	 	Minimum	 	Maximum	 	Rental Revenue Percentage	 
	475 DNR	 	$+++ per foot	 	$+++per foot	 	 	8	%
	675 DNR	 	$+++ per foot	 	$+++ per foot	 	 	8	%
	800 DNR	 	$+++ per foot	 	$+++per foot	 	 	8	%

 

If the Run Rate increases above the Maximum
Values then the Tool Sales Price and the Rental Revenue Percentage will adjust as follows.

 

Adjustments for 475 and 675 Series Tools

 

	 	 	 	 	475 Series	 	675 Series	 	 	 
	Run Rate	 	 	 	Sales Price	 	Sales Price	 	Rental Revenue Percentage	 
	$+++-$+++	 	per foot	 	$+++	 	$+++	 	 	9	%
	˃ $+++-$+++	 	per foot	 	$+++	 	$+++	 	 	10	%
	˃ $+++-$+++	 	per foot	 	$+++	 	$+++	 	 	11	%
	˃ $+++-$+++	 	per foot	 	$+++	 	$+++	 	 	12	%
	˃ $+++-$+++	 	per foot	 	$+++	 	$+++	 	 	13	%
	˃ $+++	 	per foot	 	$+++	 	$+++	 	 	14	%

 

Adjustments for 800 Series Tools

 

	 	 	 	 	800 Series	 	 	 
	Run Rate	 	 	 	Sales Price	 	Rental Revenue Percentage	 
	   $+++-$+++	 	per foot	 	$+++	 	 	9	%
	˃ $+++-$+++	 	per foot	 	$+++	 	 	10	%
	˃ $+++-$+++	 	per foot	 	$+++	 	 	11	%
	˃ $+++-$+++	 	per foot	 	$+++	 	 	12	%
	˃ $+++-$+++	 	per foot	 	$+++	 	 	13	%
	˃ $+++	 	per foot	 	$+++	 	 	14	%

 

+++ This
information has been omitted in reliance upon Rule 24b-2 under the Securities Exchange Act of 1934, as amended, and has been filed
separately with the Securities and Exchange Commission.

 

    	 	31	 

     

    

 

EXHIBIT “F”

TO

DISTRIBUTION AGREEMENT

 

Trademarks

 

Registered Trademarks:

 

	Ref No.	 	Mark	 	Registration	 	
        Goods/Services

        Class
	 	
        Appln No

        Filing Date

        &

        Country

	3039.003.USTM 	 	Drill-n- Ream	 	
        U.S. Reg. No.

        4,207,933
	 	
        International

        Class 7
	 	
        85/386,210

        08/01/2011

	United States	 	 	 	Sept 11, 2012	 	 	 	US
	 	 	 	 	 	 	 	 	 
	 	 	 	 	
        Supplemental

        Register
	 	 	 	 

 

Registered Patents:

 

	Ref No./Patent No.	 	Country
	 	 	 
	3039.002.US	 	United States
	 	 	 
	3039.002.PCT 	 	International
	 	 	 
	3039.002.AU 	 	Australia
	 	 	 
	3039.002.CA 	 	Canada
	 	 	 
	3039.002.CN	 	China

 

    	 	32	 

     

    

 

	339.002.EP	 	Europe
	 	 	 
	3039.002.MX	 	Mexico
	 	 	 
	3039.003.US	 	United States
	 	 	 
	3039.003.PCT 	 	International
	 	 	 
	3039.003.AR 	 	Argentina
	 	 	 
	3039.006.US	 	United States
	 	 	 
	3039.006.USCN	 	United States
	 	 	 
	8,752,649	 	United States
	 	 	 
	8,813,877	 	United States
	 	 	 
	8,851,205	 	United States
	 	 	 
	9,163,460	 	United States
	 	 	 
	10458AU1	 	Australia

 

    	 	33	 

     

    

 

EXHIBIT “G”

TO

DISTRIBUTION AGREEMENT

 

Owners and Competing Products

 

	Company	 	Product
	 	 	 
	Baker Hughes	 	LedgeX
	National Oilwell Varco	 	Dogleg Reamer
	Stabildrill	 	Ghost Reamer

 

    	 	34Exhibit 4.01

 

NEITHER THIS SECURITY
NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE
TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THIS SECURITY AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED
BY SUCH SECURITIES.

 

COMMON STOCK PURCHASE WARRANT

 

Neuralstem,
Inc.

 

	Warrant Shares: [_______]	Initial Exercise Date: [_______, 2016

 

THIS COMMON STOCK PURCHASE WARRANT
(the “Warrant”) certifies that, for value received, _____________ or its assigns (the “Holder”)
is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on
or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the five
(5) year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe
for and purchase from Neuralstem, Inc., a Delaware corporation (the “Company”), up to ______ shares (as subject
to adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase price of one (1) share of Common
Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).  

 

Section
1.          Definitions.  Capitalized terms used and not
otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase
Agreement”), dated May __, 2016, among the Company and the Purchasers’ signatory thereto.

 

     

     

    

 

Section
2.          Exercise.

 

a)           Exercise
of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial
Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as
it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company)
of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise in the form annexed hereto and, within two (2)
Trading Days of the date said Notice of Exercise is delivered to the Company, payment the aggregate Exercise Price of the shares
thereby purchased by wire transfer or cashier’s check drawn on a United States bank or, if available, pursuant to the cashless
exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of
Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise
form be required.  Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender
this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been
exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation promptly following the
date the final Notice of Exercise is delivered to the Company.  Partial exercises of this Warrant resulting in purchases
of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number
of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.  The
Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The
Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice.  The
Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph,
following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder
at any given time may be less than the amount stated on the face hereof.

 

b)           Exercise
Price.  The exercise price per share of the Common Stock under this Warrant shall be $0.40, subject to adjustment
hereunder (the “Exercise Price”).

 

c)           Cashless
Exercise. If at any time after the six-month anniversary of the Initial Exercise Date there is no effective registration statement
registering, or no current prospectus available for the resale of the Warrant Shares by the Holder, then this Warrant may also
be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled
to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) = the
last VWAP immediately preceding the time of delivery of the Notice of Exercise giving rise to the applicable “cashless exercise”,
as set forth in the applicable Notice of Exercise (to clarify, the “last VWAP” will be the last VWAP as calculated
over an entire Trading Day such that, in the event that this Warrant is exercised at a time that the Trading Market is open, the
prior Trading Day’s VWAP shall be used in this calculation);

 

(B) = the
Exercise Price of this Warrant, as adjusted hereunder; and

 

     

     

    

 

(X) =
the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant
if such exercise were by means of a cash exercise rather than a cashless exercise.

 

If
Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9)
of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised.  The
Company agrees not to take any position contrary to this Section 2(c).

 

“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed
or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding
date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading
Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market,
the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable,
(c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then
reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding
to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all
other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith
by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees
and expenses of which shall be paid by the Company.

 

Notwithstanding
anything herein to the contrary, if on the Termination Date there is no effective registration statement registering, or the prospectus
contained therein is not available for the issuance of the Warrant Shares to the Holder, this Warrant shall be automatically exercised
via cashless exercise pursuant to this Section 2(c).

 

     

     

    

 

d)           Mechanics
of Exercise.

 

i.            Delivery
of Warrant Shares Upon Exercise.  The Company shall cause the Warrant Shares purchased hereunder to be transmitted
by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with
The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is
then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant
Shares to or resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise
by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee,
for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder
in the Notice of Exercise by the date that is two (2) Trading Days after the delivery to the Company of the Notice of Exercise
(such date, the “Warrant Share Delivery Date”).  Upon delivery of the Notice of Exercise the Holder
shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this
Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided payment of the aggregate Exercise
Price (other than in the case of a Cashless Exercise) is received within two (2) Trading Days of delivery of the Notice of Exercise.  If
the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share
Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant
Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per
Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each
Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The
Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding
and exercisable.

 

ii.           Delivery
of New Warrants Upon Exercise.  If this Warrant shall have been exercised in part, the Company shall, at the request
of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder
a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which
new Warrant shall in all other respects be identical with this Warrant.

 

iii.          Rescission
Rights.  If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to
Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

     

     

    

 

iv.         Compensation
for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise.  In addition to any other rights available
to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with
the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such
date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage
firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which
the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to
the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the
Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order
giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the
Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed
rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied
with its exercise and delivery obligations hereunder.  For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale
price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall
be required to pay the Holder $1,000. The Holder shall provide the Company prompt written notice indicating the occurrence of the
Buy-In and amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such
loss.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law
or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

 

v.           No
Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the
exercise of this Warrant.  As to any fraction of a share which the Holder would otherwise be entitled to purchase upon
such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

 

vi.         Charges,
Taxes and Expenses.  Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer
tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid
by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by
the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name
of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed
by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer
tax incidental thereto.  The Company shall pay all Transfer Agent fees required for same-day processing of any Notice
of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions)
required for same-day electronic delivery of the Warrant Shares.

 

     

     

    

 

vii.         Closing
of Books.  The Company will not close its stockholder books or records in any manner which prevents the timely exercise
of this Warrant, pursuant to the terms hereof.

 

e)           Holder’s
Exercise Limitations.   The Company shall not effect any exercise of this Warrant, and a Holder shall not have the
right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such
issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates,
and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution
Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes
of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution
Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination
is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii)
exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation,
any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein
beneficially owned by the Holder or any of its Affiliates or Attribution Parties.  Except as set forth in the preceding sentence,
for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing
to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible
for any schedules required to be filed in accordance therewith.   To the extent that the limitation contained in this
Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole
discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of
whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution
Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and
the Company shall have no obligation to verify or confirm the accuracy of such determination.   In addition, a determination
as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder.  For purposes of this Section 2(e), in determining the number of outstanding
shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s
most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the
Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock
outstanding.  Upon the written or oral request of a Holder, the Company shall within two (2) Trading Days confirm orally and
in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares
of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this
Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of
Common Stock was reported.  The “Beneficial Ownership Limitation” shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant.  The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the
number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon
exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply.  Any increase
in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the
Company.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity
with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with
the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly
give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

 

     

     

    

 

Section 3.          Certain
Adjustments.

 

a)           Stock
Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise
makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable
in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon
exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including
by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification
of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately
after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the
aggregate Exercise Price of this Warrant shall remain unchanged.  Any adjustment made pursuant to this Section 3(a) shall
become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

     

     

    

 

b)           Subsequent
Equity Sales.  If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding,
shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce
any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents, at an effective
price per share less than the Exercise Price then in effect (such lower price, the “Base Share Price” and such
issuances collectively, a “Dilutive Issuance”) (it being understood and agreed that if the holder of the Common
Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued
in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is less than
the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive
Issuance at such effective price), then simultaneously with the consummation of each Dilutive Issuance the Exercise Price shall
be reduced and only reduced to equal the Base Share Price Such adjustment shall be made whenever such Common Stock or Common Stock
Equivalents are issued.  Notwithstanding the foregoing, no adjustments shall be made, paid or issued under this Section
3(b) in respect of an Exempt Issuance.  The Company shall notify the Holder, in writing, no later than the Trading Day
following the issuance or deemed issuance of any Common Stock or Common Stock Equivalents subject to this Section 3(b), indicating
therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such
notice, the “Dilutive Issuance Notice”).  For purposes of clarification, whether or not the Company
provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance, the Holder is
entitled to receive a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately refers
to the Base Share Price in the Notice of Exercise.

 

c)           Subsequent
Rights Offerings.  In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants,
issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the
record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled
to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired
if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to
any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as
of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights
(provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder
exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such
extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase
Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in
the Holder exceeding the Beneficial Ownership Limitation).

 

     

     

    

 

d)           Pro
Rata Distributions.  During such time as this Warrant is outstanding, if the Company shall declare or make any dividend
or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of
capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by
way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a
“Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be
entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had
held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations
on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record
is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock
are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder's
right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the
Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of
Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for
the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation).  

 

e)           Fundamental
Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Company with or into another Person (other than solely for the purpose
of changing the Company’s name or jurisdiction of incorporation), (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series
of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company
or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares
for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv)
the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization
of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged
for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates
a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than
50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons
making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement
or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this
Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately
prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section
2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant
is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise
of this Warrant).  For purposes of any such exercise, the determination of the Exercise Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share
of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration
in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If
holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction.  Notwithstanding anything to the contrary, in the event of a Fundamental Transaction,
the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently
with, or within thirty (30) days after, the consummation of the Fundamental Transaction, purchase this Warrant from the Holder
by paying to the Holder an amount of cash equal to the Black Scholes Value of the remaining unexercised portion of this Warrant
on the date of the consummation of such Fundamental Transaction.  “Black Scholes Value” means the
value of this Warrant based on the Black and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg,
L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing
purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between
the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility
equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately
following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation
shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being
offered in such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement
of the applicable Fundamental Transaction and the Termination Date.  The Company shall cause any successor entity in
a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing
all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions
of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by
the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to
the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar
in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor
Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant
(without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise
price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of
the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number
of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately
prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder.
Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that
from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring
to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company
and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect
as if such Successor Entity had been named as the Company herein.

 

     

     

    

 

f)           Calculations.
All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

g)           Notice
to Holder.  

 

i.            Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly
deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment
to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

 

ii.           Notice
to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the
Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the
Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection
with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer
of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email
to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register of the Company, at least
twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date
on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record
is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such
notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified
in such notice.  To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public
information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission
pursuant to a Current Report on Form 8-K.  The Holder shall remain entitled to exercise this Warrant during the period
commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly
set forth herein.

 

     

     

    

 

Section
4.          Transfer of Warrant.

 

a)           Transferability.  This
Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part,
upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment
of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient
to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment,
the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in
the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing
the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  Notwithstanding anything
herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder
has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading
Days of the date the Holder delivers an assignment form to the Company assigning this Warrant full. The Warrant, if properly
assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant
issued.  

 

b)           New
Warrants.  This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid
office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney.  Subject to compliance with Section 4(a), as to any transfer which may
be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall
be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant
Shares issuable pursuant thereto.

 

     

     

    

 

c)           Warrant
Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the
registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.

 

d)           Transfer
Restrictions.  If, at the time of surrender of this Warrant in connection with any transfer of this Warrant, the
Transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities
Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions
pursuant to Rule 144, the Company may require as a condition of allowing such transfer, that the Holder or transferee of this Warrant,
as the case may be, comply with the provisions of Section 4.1 of the Purchase Agreement.

 

Section
5.          Miscellaneous.

 

a)           No
Rights as Stockholder Until Exercise.  This Warrant does not entitle the Holder to any voting rights, dividends or
other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly
set forth in Section 3.  

 

b)           Loss,
Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant
Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of
the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate,
if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation,
in lieu of such Warrant or stock certificate.

 

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

 

     

     

    

 

d)           Authorized
Shares.  

 

The Company covenants that, during
the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares
to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company
further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty
of executing stock certificates to execute and issue the necessary Warrant Shares upon the exercise of the purchase rights under
this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market
upon which the Common Stock may be listed.  The Company covenants that all Warrant Shares which may be issued upon the
exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant
and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).  

 

Except and
to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending
its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions
as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.  Without
limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount
payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise
of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under
this Warrant.

 

Before taking
any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary
from any public regulatory body or bodies having jurisdiction thereof.

 

     

     

    

 

 

e)           Jurisdiction.
All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.

 

f)            Restrictions.  The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions
upon resale imposed by state and federal securities laws.

 

g)           Nonwaiver
and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder
shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies.  Without
limiting any other provision of this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply
with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such
amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.

 

h)           Notices.  Any
notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered
in accordance with the notice provisions of the Purchase Agreement.

 

i)            Limitation
of Liability.  No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant
to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability
of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted
by the Company or by creditors of the Company.

 

j)            Remedies.  The
Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant.  The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and
not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

k)           Successors
and Assigns.  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby
shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted
assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of any Holder from time to time
of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

 

l)            Amendment.  This
Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

     

     

    

 

m)          Severability.  Wherever
possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions
of this Warrant.

 

n)           Headings.  The
headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this
Warrant.

 

********************

 

(Signature Page Follows)

 

     

     

    

 

IN WITNESS
WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above
indicated.

 

 

	 	Neuralstem, Inc.
	 	 	 
	 	By:	 
	 	 	Name: Richard Daly
	 	 	Title: President and CEO

 

     

     

    

 

NOTICE OF EXERCISE

 

To:     NEURALSTEM,
INC.

 

(1)  The undersigned
hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised
in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2)  Payment
shall take the form of (check applicable box):

 

[ ] in lawful
money of the United States; or

 

[ ] [if permitted
the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c),
to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure
set forth in subsection 2(c).

 

(3)  Please
issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

	 	 	 

 

The Warrant Shares shall be delivered to
the following DWAC Account Number:

 

	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 

 

[SIGNATURE
OF HOLDER]

 

Name of Investing Entity:

	 	 
	Signature of Authorized Signatory of Investing Entity: 

	 	 
	Name of Authorized Signatory:

	 	 
	Title of Authorized Signatory:

	 	 
	Date:	 	 	 

 

     

     

    

 

ASSIGNMENT
FORM

(To assign the foregoing
Warrant, execute this form and supply required information.  Do not use this form to purchase shares.)

 

FOR VALUE RECEIVED,
the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

	
        Name:
	 	
	 	 	(Please Print)
	Address:	 	
	 	 	(Please Print)
	 	 	 
	Phone Number:	 	 
	 	 	 
	Email Address: 	 	 
	 	 	 
	Dated: _______________ __, ______	 	 
	 	 	 
	Holder’s Signature:	 	 	 
	 	 	 
	Holder’s Address:

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