Document:

Blueprint

 

Exhibit 10.4

 

LICENSE AGREEMENT

 

THIS
LICENSE AGREEMENT (this “Agreement”) dated as of
September 3, 2015 (the “Effective Date”), is entered
into between Daniel A. Vallera, an individual having a place of
residence at ____________________________________ , Jeffrey Lion,
an individual having a place of residence at
____________________________________ (collectively hereinafter
“Licensor”), and Oxis Biotech, Inc., a Delaware
corporation (“Company” or “Oxis”), having a
place of business at 1402 North
Beverly Drive, Beverly Hills, CA 90210 .

 

WHEREAS, Licensor
owns or has rights in the Technology (as defined
below).

 

WHEREAS, Oxis
desires to obtain an exclusive license under Licensor’s
rights in the Technology on the terms and conditions set forth
below.

 

NOW,
THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, the parties hereby agree as
follows:

 

1. DEFINITIONS

 

For
purposes of this Agreement, the terms defined in this
Section 1 shall have the respective meanings set forth
below:

 

1.1 “Affiliate” shall mean,
with respect to any Person, any other Person which directly or
indirectly controls, is controlled by, or is under common control
with, such Person. A Person shall be regarded as in control of
another Person if it owns, or directly or indirectly controls, at
least fifty percent (50%) of the voting stock or other ownership
interest of the other Person, or if it directly or indirectly
possesses the power to direct or cause the direction of the
management and policies of the other Person by any means
whatsoever.

 

1.2 “Competent Authority(ies)”
or “Competent
Regulatory Authority(ies)” shall mean, collectively,
(a) the governmental entities in each country or supranational
organization that is responsible for the regulation of any Product
intended for use in the Field or the establishment, maintenance
and/or protection of rights related to the Licensed IP Rights
(including the FDA, the EMEA and the MHLW), or (b) any other
applicable regulatory or administrative agency in any country or
supranational organization that is comparable to, or a counterpart
of, the foregoing.

 

1.3 “EMEA” shall mean the
European Agency for the Evaluation of Medicinal Products of the
European Union, or the successor thereto.

 

1.4 “FDA” shall mean the Food
and Drug Administration of the United States, or the successor
thereto.

 

1.5 “Field” shall mean
compounds and methods for the treatment of any disease, state or
condition in humans.

 

 

1

 

 

1.6  “First
Commercial Sale” shall mean, with respect to any
Product, the first sale of such Product after all applicable
marketing and pricing approvals (if any) have been granted by the
applicable governing health authority of such country.

 

1.7 “Licensed IP Rights” shall
mean, collectively, the Licensed Patent Rights and the Licensed
Know-How Rights.

 

1.8 “Licensed Know-How Rights”
shall mean all trade secret and other know-how rights in and to all
data, information, compositions and other technology (including,
but not limited to, formulae, procedures, protocols, techniques and
results of experimentation, all CD19 scFv and CD22 scFv clones used
to manufacture DT2219ARL, the aggregation reducing linker (ARL)
technology used to manufacture DT2219ARL, and the mutated and
deimmunized form of truncated diphtheria toxin used to manufacture
DT2219ARL) which are necessary or useful for Oxis to make, use,
develop, sell or seek regulatory approval to market a composition
such as DT2219ARL, or to practice any method or process, at any
time claimed or disclosed in any issued patent or pending patent
application within the Licensed Patent Rights or which otherwise
relates to the Technology.

 

1.9 “Licensed Patent Rights”
shall mean (a) the patents and patent applications listed on
Schedule A hereto, (b) all patents and patent applications in
any country of the world that claim or cover the Technology in
which Licensor heretofore or hereafter has an ownership or
(sub)licensable interest, (c) all divisions, continuations,
continuations-in-part, that claim priority to, or common priority
with, the patent applications listed in clauses (a) - (b) above or
the patent applications that resulted in the patents described in
clauses (a) - (b) above, and (d) all patents that have issued
or in the future issue from any of the foregoing patent
applications, including utility, model and design patents and
certificates of invention, together with any reissues, renewals,
extensions or additions thereto.

 

1.10 “NDA”
shall mean a New Drug Application, or similar application for
marketing approval of a Product for use in the Field submitted to
the FDA, or its foreign equivalent.

 

1.11 “Net
Sales” shall mean, with respect to any Product, the
gross sales price of such Product invoiced by Oxis or its Affiliate
to customers who are not Affiliates (or are Affiliates but are the
end users of such Product) less, to the extent actually paid or
accrued by Oxis or its Affiliate (as applicable), (a) credits,
allowances, discounts and rebates to, and chargebacks from the
account of, such customers for nonconforming, damaged, out-dated
and returned Product; (b) freight and insurance costs incurred
by Oxis or its Affiliate (as applicable) in transporting such
Product to such customers; (c) cash, quantity and trade
discounts, rebates and other price reductions for such Product
given to such customers under price reduction programs;
(d) sales, use, value-added and other direct taxes incurred on
the sale of such Product to such customers; (e) customs
duties, tariffs, surcharges and other governmental charges incurred
in exporting or importing such Product to such customers;
(f) sales commissions incurred on the sale of such Product to
such customers; and (g) an allowance for uncollectible or bad
debts determined in accordance with generally accepted accounting
principles.

 

 

2

 

 

1.12 “Net
Sublicensing Revenues” shall mean, with respect to any
Product, the aggregate cash consideration received by Oxis or its
Affiliates in consideration for the sublicense under the Licensed
Patent Rights or Licensed Know-How Rights by Oxis or its Affiliates
to a Third Party sublicensee with respect to such Product
(including royalties received by Oxis or its Affiliates based on
sales of such Product by such sublicensee, but excluding amounts
received to reimburse Oxis’ or its Affiliates’ cost to
perform research, development or similar services conducted for
such Product after signing the agreement with the Third Party, in
reimbursement of patent or other out-of-pocket expenses relating to
such Product, or in consideration for the purchase of any debt or
securities of Oxis or its Affiliates).

 

1.13 “Person”
shall mean an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock
company, joint venture, pool, syndicate, sole proprietorship,
unincorporated organization, governmental authority or any other
form of entity not specifically listed herein.

 

1.14 “Phase I
Clinical Trial” shall mean a human clinical trial that
is intended to initially evaluate the safety and/or pharmacological
effect of a Product in subjects or that would otherwise satisfy
requirements of 21 C.F.R. 312.21(a), or its foreign
equivalent.

 

1.15 “Phase II
Clinical Trial” shall mean a human clinical trial in
any country that is intended to initially evaluate the
effectiveness of a Product for a particular indication or
indications in patients with the disease or indication under study
or would otherwise satisfy requirements of
21 CFR 312.21(b), or its foreign equivalent.

 

1.16  “Phase III
Clinical Trial” shall mean a human clinical trial in
any country, the results of which could be used to establish safety
and efficacy of a Product as a basis for an NDA or would otherwise
satisfy requirements of 21 CFR 312.21(c), or its foreign
equivalent.

 

1.17 “Product(s)”
shall mean DT2219ARL, a CD19/CD22 bispecific scFv antibody-drug
conjugate containing aggregation reducing linkers and a mutated and
deimmunized form of a truncated diphtheria toxin for use in the
Field that if made, used, sold, offered for sale or imported absent
the license granted hereunder would infringe a Valid Claim, or that
otherwise uses or incorporates the Licensed Know-How
Rights.

 

1.18 “Registration(s)”
shall mean any and all permits, licenses, authorizations,
registrations or regulatory approvals (including NDAs) required
and/or granted by any Competent Authority as a prerequisite to the
development, manufacturing, packaging, marketing and selling of any
product.

 

1.19 “Royalty
Term” shall mean, with respect to each Product in each
country, the term for which a Valid Claim remains in effect and
would be infringed but for the license granted by this Agreement,
by the use, offer for sale, sale or import of such Product in such
country.

 

1.20 “Technology”
shall mean all compositions, CD19 scFv producing clones, CD22 scFv
producing clones, aggregation reducing linkers (ARL), mutated and
deimmunized form of a truncated diphtheria toxin, formulae,
procedures, formulations, methods of manufacture, in vitro data, and animal and human
in vivo data related to
Products, and all uses thereof for treating diseases in
humans.

 

 

3

 

 

1.21 “Territory”
shall mean worldwide.

 

1.22 “Third
Party” shall mean any Person other than Licensor, Oxis
and their respective Affiliates.

 

1.23 “Valid
Claim” shall mean a claim of an issued and unexpired
patent included within the Licensed Patent Rights, which has not
been held permanently revoked, unenforceable or invalid by a
decision of a court or other governmental agency of competent
jurisdiction, unappealable or unappealed within the time allowed
for appeal, and which has not been admitted to be invalid or
unenforceable through reissue or disclaimer or
otherwise.

 

2. REPRESENTATIONS
AND WARRANTIES

 

2.1 Mutual Representations and
Warranties. Each party hereby represents and warrants to the
other party as follows:

 

2.1.1 Such
party is an individual, or is a corporation duly organized, validly
existing and in good standing under the laws of the state in which
it is incorporated.

 

2.1.2 Such
party (a) has the power and authority and the legal right to
enter into this Agreement and to perform its obligations hereunder,
and (b) has taken all necessary action on its part to
authorize the execution and delivery of this Agreement and the
performance of its obligations hereunder. This Agreement has been
duly executed and delivered on behalf of such party, and
constitutes a legal, valid, binding obligation, enforceable against
such party in accordance with its terms.

 

2.1.3 All
necessary consents, approvals and authorizations of all
governmental authorities and other Persons required to be obtained
by such party in connection with this Agreement have been
obtained.

 

2.1.4 The
execution and delivery of this Agreement and the performance of
such party’s obligations hereunder (a) do not conflict with
or violate any requirement of applicable laws or regulations, and
(b) do not conflict with, or constitute a default under, any
contractual obligation of it.

 

2.2 Licensor Representations and
Warranties. Licensor hereby represents and warrants to Oxis
as follows:

 

2.2.1 Licensor
(a) is the owner of the Licensed IP Rights and has the sole
right to execute this Agreement, and has not granted to any Third
Party any license or other interest in the Licensed IP Rights,
(b) is not aware of any Third Party patent, patent application
or other intellectual property rights that would be infringed
(i) by practicing any process or method or by making, using or
selling any composition which is claimed or disclosed in the
Licensed Patent Rights or which constitutes Licensed Know-How
Rights, or (ii) by making, using or selling Products, and
(c) is not aware of any infringement or misappropriation by a
Third Party of the Licensed IP Rights.

 

 

4

 

 

3. LICENSE
GRANT

 

3.1 Licensed IP Rights. Licensor
hereby grants to Oxis an exclusive license (with the right to grant
sublicenses) under the Licensed IP Rights to conduct research and
to develop, make, have made, use, offer for sale, sell, have sold,
and import Products in the Territory for use in the
Field.

 

3.2 Sublicenses.                                 Licensor
grants to Oxis the right to grant sublicenses to third parties,
provided that (i) the Sublicensee agrees to abide by all the terms
and provisions of this Agreement; (ii) Oxis remains fully liable
for the performance of its and its Sublicensee’s obligations
hereunder; and (iii) Oxis notifies Licensor of any grant of a
sublicense and provide to Licensor upon Licensor request a copy of
any sublicense agreement.

 

3.3 Availability of the Licensed IP
Rights. Licensor shall provide Oxis with a copy of all
information available to Licensor relating to the Licensed IP
Rights, Products or Technology, including without limitation:
(a) regulatory submissions, (b) communications with the
Competent Authorities (including the minutes of any meetings),
(c) trial master files, including case report forms,
(d) listings and tables of results from the clinical trials,
(e) treatment-related serious adverse event reports from the
clinical trials, (f) storage of and access permission to any
retained samples of materials used in clinical trials, (g)
manufacturing and quality control procedures and formulation
procedures, and (h) access to CMOs and CROs involved in the
clinical trials.

 

3.4 Registrations. Licensor
acknowledges and agrees that Oxis shall own all Registrations for
Products for use in the Field in each country in the Territory.
Additionally, Licensor acknowledges and agrees that Oxis shall have
the right to conduct pre-clinical and clinical development
activities outside of the Territory. Licensor hereby grants to Oxis
a free-of-charge right to reference and use and have full access to
all other Registrations and all other regulatory documents that
relate to the Licensed IP Rights, Products or Technology, including
INDs, BLAs, NDAs and DMFs (whether as an independent document or as
part of any NDA, and all chemistry, manufacturing and controls
information), and any supplements, amendments or updates to the
foregoing (for the purposes of this Section, the “Right of
Reference”). Oxis shall have the right to (sub)license the
Right of Reference to its sublicensees and Affiliates.

 

3.5 Access to Manufacturers.
Licensor shall use his commercially reasonable efforts to provide
access to Oxis to any suppliers of Products and any form of any
Product for use in the Field on terms and conditions no less
favorable than those terms and conditions between Licensor and such
supplier.

 

4. FINANCIAL
CONSIDERATIONS

 

4.1 Royalties.

 

4.1.1 Royalty Rate. During the
applicable Royalty Term for a Product, subject to the terms and
conditions of this Agreement, Oxis shall pay to Licensor royalties,
with respect to each Product, equal to (a) THREE percent (3%)
of Net Sales of such Product by Oxis and its Affiliates, and
(b) TWENTY-FIVE percent (25%) of Net Sublicensing
Revenues for such Product. Only one royalty shall be owing for a
Product regardless of how many Valid Claims cover such Product for
the life of the last to expire Patent in a country having Valid
Claim.

 

 

5

 

 

4.1.2 Third Party Royalties. If Oxis,
its Affiliates or sublicensees is required to pay royalties to any
Third Party in order to exercise its rights hereunder to make, have
made, use, sell, offer to sale or import any Product, then Oxis
shall have the right to credit one percent (1%) of such Third Party
royalty payments against the royalties owing to Licensor under
Section 4.2.1 above with respect to sales of such Product in
such country; provided, however, that Oxis shall not reduce the
amount of the royalties paid to Licensor under Section 4.2.1
above by reason of this Section 4.2.2, with respect to sales
of such Product in such country, to less than one percent (1%) of
Net Sales of such Product in such country. In consideration of the
right to sublicense third parties granted under Section 3.2, Oxis
shall pay to Licensor ten percent (10%) of all royalties received
by Oxis from its Sublicensees if the sublicense is executed on or
before the first anniversary of the Effective Date of the License
Agreement signed between the parties, and ten percent (10%) of all
royalties received by Oxis from its Sublicensees if the Sublicense
is executed thereafter. In no event, however, shall Oxis pay
Licensor less than the amount which would have been due under
Section 4.2.2 of this Agreement in the absence of a
sublicense.

 

4.2 License Fee. Oxis shall pay
Licensor a non-refundable license fee of ONE HUNDRED AND FIFTY
THOUSAND dollars ($150,000.00) which shall be payable upon
execution of this Agreement.

 

4.3 Milestone Payments. Oxis shall
pay to Licensor the following clinical development milestone
payments within thirty (30) days following the first achievement of
the applicable milestone:

 

4.3.1 TWO
HUNDRED FIFTY THOUSAND dollars ($250,000.00) due upon initiation of
a Phase Ib/II clinical trial;

 

4.3.2 TWO
HUNDRED FIFTY THOUSAND dollars ($250,000.00) due upon initiation of
a Phase III clinical trial;

 

4.3.3 ONE
MILLION dollars ($1,000,000.00) due upon receipt by Oxis of
marketing approval by any Competent Regulatory Authority within the
Territory.

 

Each of
the foregoing Milestone Payments shall be paid only one
time.

 

5. ROYALTY REPORTS AND
ACCOUNTING

 

5.1 Royalty Reports. Within sixty
(60) days after the end of each calendar quarter during the term of
this Agreement following first to occur of the First Commercial
Sale of a Product and the receipt by Oxis or its Affiliates of Net
Sublicensing Revenues, Oxis shall furnish to Licensor a quarterly
written report showing in reasonably specific detail (a) the
calculation of Net Sales during such calendar quarter; (b) the
calculation of Net Sublicensing Revenues for such quarter;
(c) the calculation of the royalties, if any, that shall have
accrued based upon such Net Sales and Net Sublicensing Revenues;
(d) the withholding taxes, if any, required by law to be
deducted with respect to such sales; and (e) the exchange
rates, if any, used in determining the amount of United States
dollars. With respect to sales of Products invoiced in United
States dollars, the gross sales, Net Sales and royalties payable
shall be expressed in United States dollars. With respect to
(i) Net Sales invoiced in a currency other than United States
dollars and (ii) cash consideration paid in a currency other
than United States dollars by Oxis’s sublicensees hereunder,
all such amounts shall be expressed both in the currency in which
the distribution is invoiced and in the United States dollar
equivalent. The United States dollar equivalent shall be calculated
using the average of the exchange rate (local currency per US$1)
published in The Wall
Street Journal, Western Edition, under the heading
“Currency Trading” on the last business day of each
month during the applicable calendar quarter.

 

 

6

 

 

5.2 Audits.

 

5.2.1 Upon
the written request of Licensor and not more than once in each
calendar year, Oxis shall permit an independent certified public
accounting firm of nationally recognized standing selected by
Licensor and reasonably acceptable to Oxis, at Licensor’s
expense, to have access during normal business hours to such of the
financial records of Oxis as may be reasonably necessary to verify
the accuracy of the payment reports hereunder for the eight (8)
calendar quarters immediately prior to the date of such request
(other than records for which Licensor has already conducted an
audit under this Section.

 

5.2.2 If
such accounting firm concludes that additional amounts were owed
during the audited period, Oxis shall pay such additional amounts
within thirty (30) days after the date Licensor delivers to Oxis
such accounting firm’s written report so concluding. The fees
charged by such accounting firm shall be paid by Licensor;
provided, however, if the audit discloses that the royalties
payable by Oxis for such period are more than one hundred ten
percent (110%) of the royalties actually paid for such period, then
Oxis shall pay the reasonable fees and expenses charged by such
accounting firm.

 

5.2.3 Licensor
shall cause its accounting firm to retain all financial information
subject to review under this Section 5.2 in strict confidence;
provided, however, that Oxis shall have the right to require that
such accounting firm, prior to conducting such audit, enter into an
appropriate non-disclosure agreement with Oxis regarding such
financial information. The accounting firm shall disclose to
Licensor only whether the reports are correct or not and the amount
of any discrepancy. No other information shall be shared. Licensor
shall treat all such financial information as Oxis’
Confidential Information.

 

6. PAYMENTS

 

6.1 Payment Terms. Royalties shown
to have accrued by each royalty report provided for under
Section 5 above shall be due on the date such royalty report
is due. Payment of royalties in whole or in part may be made in
advance of such due date.

 

6.2 Exchange Control. If at any
time legal restrictions prevent the prompt remittance of part or
all royalties with respect to any country in the Territory where
the Product is sold, Oxis shall have the right, in its sole
discretion, to make such payments by depositing the amount thereof
in local currency to Licensor’s account in a bank or other
depository institution in such country. If the royalty rate
specified in this Agreement should exceed the permissible rate
established in any country, the royalty rate for sales in such
country shall be adjusted to the highest legally permissible or
government-approved rate.

 

 

7

 

 

6.3 Withholding Taxes. Oxis shall
be entitled to deduct the amount of any withholding taxes,
value-added taxes or other taxes, levies or charges with respect to
such amounts, other than United States taxes, payable by Oxis, its
Affiliates or sublicensees, or any taxes required to be withheld by
Oxis, its Affiliates or sublicensees, to the extent Oxis, its
Affiliates or sublicensees pay to the appropriate governmental
authority on behalf of Licensor such taxes, levies or charges. Oxis
shall use reasonable efforts to minimize any such taxes, levies or
charges required to be withheld on behalf of Licensor by Oxis, its
Affiliates or sublicensees. Oxis promptly shall deliver to Licensor
proof of payment of all such taxes, levies and other charges,
together with copies of all communications from or with such
governmental authority with respect thereto.

 

7. RESEARCH
AND DEVELOPMENT OBLIGATIONS

 

7.1 Research and Development
Efforts. Oxis shall use its commercially reasonable efforts
to conduct such research, development and preclinical and human
clinical trials as Oxis determines are necessary or desirable to
obtain regulatory approval to manufacture and market such Products
as Oxis determines are commercially feasible in the Territory, and
shall use its commercially reasonable efforts to obtain regulatory
approval to market, and following approval to commence marketing
and market each such Product in such countries in the Territory as
Oxis determines are commercially feasible.

 

7.2 Records. Licensor and Oxis
shall maintain records, in sufficient detail and in good scientific
manner, which shall reflect all work done and results achieved in
the performance of its research and development regarding the
Products.

 

7.3 Reports. Within ninety (90)
days following the end of each calendar year during the term of
this Agreement, Licensor shall prepare and deliver to Oxis a
written summary report which shall describe (a) the research
performed to date employing the Licensed IP Rights, (b) the
progress of the development, and testing of Products in clinical
trials, and (c) the status of obtaining regulatory approvals
to market Products.

 

8. CONFIDENTIALITY

 

8.1 For purposes of
this Agreement “Confidential Information" means any and all
information and material disclosed by the disclosing party to the
recipient or obtained by recipient through inspection or
observation of discloser’s property or facilities (before or
after the signing of this Agreement, and whether in writing, or in
oral, graphic, electronic or any other form), including, but not
necessarily limited to, trade secret, know-how, idea, invention,
process, technique, algorithm, program (whether in source code or
object code form), hardware, device, design, schematic, drawing,
formula, data, plan, strategy and forecast of, technical,
engineering, manufacturing, product, marketing, all notes, books,
papers, diagrams, documents, reports, memoranda, servicing,
financial, personnel and other information and materials of,
discloser and its employees, consultants, investors, affiliates,
licensors, suppliers, vendors, customers, clients and other persons
and entities, disclosed by one Party to the other.

 

 

8

 

 

8.2 Licensor and Oxis
agree that the recipient of Confidential Information shall not
disclose, cause, or permit to be disclosed said information to any
third party or parties, subject to the exceptions contained herein,
without the prior written consent of the disclosing
Party.

 

8.3 Confidential
Information may be disclosed to consultants, agents, and advisors
of either Licensor or Oxis; provided, those to whom information or
data is disclosed, regarding or concerning the matters contemplated
herein, shall become parties to this Agreement or otherwise be
bound to maintain such information in confidence under terms at
least as protective as those provided herein. Either Party may also
disclose such information as it deems appropriate to its employees
provided such employees have a need to know. Licensor and Oxis
agree to enforce the terms and provisions of this Agreement as to
any such employee, consultant, agent or advisor who receives
Confidential Information hereunder, and to assume liability for
breach of this Agreement by any or all such persons.

 

8.4 Notwithstanding
anything to the contrary contained herein, the recipient of
Confidential Information disclosed hereunder shall be under no duty
to maintain the confidentiality of any such information which it
can reasonably establish:

 

8.4.1 At
the time of disclosure is within the public domain;

 

8.4.2 After
disclosure becomes a part of the public domain through no fault,
act or failure to act, error, effort or breach of this Agreement by
the recipient;

 

8.4.3 Is
known to the recipient at the time of disclosure as evidenced by
recipient’s contemporaneous written
documentation;

 

8.4.4 Is
required by order, statute or regulation, of any government
authority to be disclosed to any federal or state agency, court or
other body, provided, however that any Party directed to disclose
information pursuant to a subpoena or other legal compulsion shall
use its best efforts under the circumstances to promptly notify the
disclosing Party of same so as to provide or afford the disclosing
Party the opportunity to obtain such protective orders or other
relief as the compelling court or other entity may
grant.

 

8.4.5 Confidential
Information will not be deemed to have been published merely
because individual portions of the information have been separately
published, but only if all material features comprising such
information have been published in combination.

 

8.5 Neither Licensor
nor Oxis will use for its own purpose(s), nor cause or permit to be
used by others, either directly or indirectly, any Confidential
Information disclosed hereunder without the prior written consent
of the Party making such disclosure.

 

 

9

 

 

9. PATENTS

 

9.1 Patent Prosecution and
Maintenance. Oxis shall have the right to control, at its
sole cost, the preparation, filing, prosecution and maintenance of
all patents and patent applications within the Licensed Patent
Rights. Oxis shall give Licensor an opportunity to review and
comment on the text of each patent application subject to this
Section 9.1 before filing, and shall supply Licensor with a
copy of such patent application as filed, together with notice of
its filing date and serial number. Licensor shall cooperate with
Oxis, execute all lawful papers and instruments and make all
rightful oaths and declarations as may be necessary in the
preparation, prosecution and maintenance of all patents and other
filings referred to in this Section 9.1. If Oxis, in its sole
discretion, decides to abandon the preparation, filing, prosecution
or maintenance of any patent or patent application in the Licensed
Patent Rights, then Oxis shall notify Licensor in writing thereof
and following the date of such notice (a) Licensor shall be
responsible for and shall control, at its sole cost, the
preparation, filing, prosecution and maintenance of such patents
and patent applications, and (b) Oxis shall thereafter have no
license under this Agreement to such patent or patent
application.

 

9.2 Notification of Infringement.
Each party shall notify the other party of any substantial
infringement in the Territory known to such party of any Licensed
Patent Rights and shall provide the other party with the available
evidence, if any, of such infringement.

 

9.3 Enforcement of Patent Rights.
Oxis, at its sole expense, shall have the right to determine the
appropriate course of action to enforce Licensed Patent Rights or
otherwise abate the infringement thereof, to take (or refrain from
taking) appropriate action to enforce Licensed Patent Rights, to
defend any declaratory judgments seeking to invalidate or hold the
Licensed Patent Rights unenforceable, to control any litigation or
other enforcement action and to enter into, or permit, the
settlement of any such litigation, declaratory judgments or other
enforcement action with respect to Licensed Patent Rights, in each
case in Oxis’ own name and, if necessary for standing
purposes, in the name of Licensor and shall consider, in good
faith, the interests of Licensor in so doing. If Oxis does not,
within one hundred twenty (120) days of receipt of notice from
Licensor, abate the infringement or file suit to enforce the
Licensed Patent Rights against at least one infringing party in the
Territory, Licensor shall have the right to take whatever action it
deems appropriate to enforce the Licensed Patent Rights; provided,
however, that, within thirty (30) days after receipt of notice of
Licensor’s intent to file such suit, Oxis shall have the
right to jointly prosecute such suit and to fund up to one-half
(1⁄2) the costs of such suit. The party controlling any such
enforcement action shall not settle the action or otherwise consent
to an adverse judgment in such action that diminishes the rights or
interests of the non-controlling party without the prior written
consent of the other party. All monies recovered upon the final
judgment or settlement of any such suit to enforce the Licensed
Patent Rights shall be shared, after reimbursement of expenses, in
relation to the damages suffered by each party. If Oxis does not
receive sufficient monies from a final judgment or settlement to
cover its expenses for such suit, Oxis shall have the right to
credit up to fifty percent (50%) of such expenses against any
royalties or other fees owing by Oxis pursuant to Section 4
above.

 

9.4 Cooperation. In any suit to
enforce and/or defend the License Patent Rights pursuant to this
Section 9, the party not in control of such suit shall, at the
request and expense of the controlling party, reasonably cooperate
and, to the extent possible, have its employees testify when
requested and make available relevant records, papers, information,
samples, specimens, and the like.

 

 

10

 

 

10. TERMINATION

 

10.1 Expiration.
Subject to Sections 10.2 and 10.3 below, this Agreement shall
expire on the expiration of Oxis’ obligation to pay royalties
to Licensor under Section 4.1 above. The license grant under
Section 3.1 shall be effective at all times prior to such
expiration and following such expiration of this Agreement
(a) Oxis shall have a fully paid-up, non-exclusive license
under the Licensed Know-How Rights to conduct research and to
develop, make, have made, use, sell, offer for sale and import
Products in the Territory for use in the Field, and
(b) Sections 3.5 and 3.6 shall survive.

 

10.2 Termination by Oxis. Oxis may
terminate this Agreement, in its sole discretion, upon thirty (30)
days prior written notice to Licensor. This includes and is not
limited to the failure of U.S. Patent Application Serial No.
13/256,812 to issue as a U.S. patent, or for Product to fail during
clinical development.

 

10.3 Termination for Cause. Except
as otherwise provided in Section 12, Licensor may terminate
this Agreement upon or after the breach of any material provision
of this Agreement by Oxis if Oxis has not cured such breach within
ninety (90) days after receipt of express written notice thereof by
Licensor; provided, however, if any default is not capable of being
cured within such ninety (90) day period and Oxis is diligently
undertaking to cure such default as soon as commercially feasible
thereafter under the circumstances, Licensor shall have no right to
terminate this Agreement.

 

10.3.1                      

Termination by
Licensor: Estimated costs associated with DT2219 ARL are estimated
to be $639,351.23 as per the University of Minnesota Clinical Trial
Office’s 3 year budget, hereby included as Exhibit A.
Licensor may terminate this agreement if Oxis does not fund over
the next three years all costs associated with the 30 subjects
(patients) needed to finish the Phase 1-2 trial estimated to be
$639,351.23. Oxis’s obligations to Licensor shall be
considered to be in compliance once the 30 subjects have been
treated or if Oxis has paid $639,351.23 towards the budget for the
Clinical trial, or the Clinical Trial is cancelled.

 

10.4 :
Expiration or termination of this Agreement shall not relieve the
parties of any obligation accruing prior to such expiration or
termination, and the provisions of Sections 8, 11, 13 shall survive
the expiration or termination of this Agreement brought about by a
default or non-compliance by Licensor of any portion or provision
of this agreement. Upon termination of this agreement, Licensor
shall grant a direct license to any sublicense of Oxis hereunder
having the same scope as such sublicense and on terms and
conditions no less favorable to such sublicensee than the terms and
conditions of this Agreement, provided that such sublicensee is not
in default of any applicable obligations under this Agreement and
agrees in writing to be bound by the terms and conditions of such
direct license. However, upon any termination of this agreement
brought about by a default or non-compliance of any portion or
provision of this agreement by Licensee shall result in the
revocation of Oxis’s license and any sublicenses for DT2219
ARL (Product).

 

 

11

 

 

11. INDEMNIFICATION

 

11.1 Indemnification.
Oxis shall defend, indemnify and hold Licensor harmless from all
losses, liabilities, damages and expenses (including
attorneys’ fees and costs) incurred as a result of any claim,
demand, action or proceeding arising out of any breach of this
Agreement by Oxis, or the gross negligence or willful misconduct of
Oxis in the performance of its obligations under this Agreement,
except in each case to the extent arising from the gross negligence
or willful misconduct of Licensor or the breach of this Agreement
by Licensor.

 

11.2 Procedure.
Licensor promptly shall notify Oxis of any liability or action in
respect of which Licensor intends to claim such indemnification,
and Oxis shall have the right to assume the defense thereof with
counsel selected by Oxis. The indemnity agreement in this
Section 11 shall not apply to amounts paid in settlement of
any loss, claim, damage, liability or action if such settlement is
effected without the consent of Oxis, which consent shall not be
withheld unreasonably. The failure to deliver notice to Oxis within
a reasonable time after the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve
Oxis of any liability to Licensor under this Section 11, but
the omission so to deliver notice to Oxis will not relieve it of
any liability that it may have to Licensor otherwise than under
this Section 11. Licensor under this Section 11, its
employees and agents, shall cooperate fully with Oxis and its legal
representatives in the investigation and defense of any action,
claim or liability covered by this indemnification.

 

11.3 Insurance.
Oxis shall maintain product liability insurance with respect to the
research, development, manufacture and sales of Products by Oxis in
such amount as Oxis customarily maintains with respect to the
research, development, manufacture and sales of its similar
products. Oxis shall maintain such insurance for so long as it
continues to research, develop, manufacture or sell any Products,
and thereafter for so long as Oxis customarily maintains insurance
covering the research, development, manufacture or sale of its
similar products.

 

 

12

 

 

12. FORCE MAJEURE

 

Neither
party shall be held liable or responsible to the other party nor be
deemed to have defaulted under or breached this Agreement for
failure or delay in fulfilling or performing any term of this
Agreement to the extent, and for so long as, such failure or delay
is caused by or results from causes beyond the reasonable control
of the affected party including but not limited to fire, floods,
embargoes, war, acts of war (whether war be declared or not), acts
of terrorism, insurrections, riots, civil commotions, strikes,
lockouts or other labor disturbances, acts of God or acts,
omissions or delays in acting by any governmental authority or the
other party.

 

13. MISCELLANEOUS

 

13.1 Notices.
Any consent, notice or report required or permitted to be given or
made under this Agreement by one of the parties hereto to the other
party shall be in writing, delivered by any lawful means to such
other party at its address indicated below, or to such other
address as the addressee shall have last furnished in writing to
the addressor and (except as otherwise provided in this Agreement)
shall be effective upon receipt by the addressee.

 

Licensor:                            
Daniel A. Vallera, Ph.D.

________________________

________________________

 

Jeffrey
Lion

________________________

________________________

 

Oxis:                                   
Anthony Cataldo

Chairman &
CEO

Oxis
Biotech, Inc.

1402
North Beverly Drive

Beverly
Hills, CA 90210

 

 

with a
copy
to:                    
DLA Piper US

4365
Executive Drive, Suite 1100

San
Diego, California 92130

Attention: Lisa A.
Haile, Ph.D, Esq.

 

13.2 Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard
to the conflicts of law principles thereof. All legal fees
attributed to completion of any lawsuits brought on be either party
will be the responsibility of the loosing party.

 

13.3 Assignment.
Oxis shall not assign its rights or obligations under this
Agreement without the prior written consent of Licensor; provided,
however, that Oxis may, without such consent, assign this Agreement
and its rights and obligations hereunder (a) to any Affiliate, or
(b) in connection with the transfer or sale of all or substantially
all of its business to which this Agreement relates, or in the
event of its merger, consolidation, change in control or similar
transaction. Any permitted assignee shall assume all obligations of
its assignor under this Agreement.

 

 

13

 

 

13.4 Waivers
and Amendments. No change, modification, extension,
termination or waiver of this Agreement, or any of the provisions
herein contained, shall be valid unless made in writing and signed
by duly authorized representatives of the parties
hereto.

 

13.5 Entire
Agreement. This Agreement embodies the entire agreement
between the parties and supersedes any prior representations,
understandings and agreements between the parties regarding the
subject matter hereof. There are no representations, understandings
or agreements, oral or written, between the parties regarding the
subject matter hereof that are not fully expressed
herein.

 

13.6 Severability.
Any of the provisions of this Agreement which are determined to be
invalid or unenforceable in any jurisdiction shall be ineffective
to the extent of such invalidity or unenforceability in such
jurisdiction, without rendering invalid or unenforceable the
remaining provisions hereof and without affecting the validity or
enforceability of any of the terms of this Agreement in any other
jurisdiction.

 

13.7 Waiver.
The waiver by either party hereto of any right hereunder or the
failure to perform or of a breach by the other party shall not be
deemed a waiver of any other right hereunder or of any other breach
or failure by said other party whether of a similar nature or
otherwise.

 

13.8 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

 

13.10                      Bankruptcy.
In the event Company enters into voluntary bankruptcy, involuntary
bankruptcy, or such similar proceeding or order that would
adversely affect its ability to perform its obligations hereunder,
this Agreement shall terminate.

 

 

14

 

 

IN
WITNESS WHEREOF, the parties have executed this Agreement effective
as of the Effective Date.

 

For LICENSOR:

 

	

By: /s/
Daniel A. Vallera

	
 

	

By: /s/
Jeffrey Lion

	

Name:
Daniel A.Vallera, Ph.D.

	
 

	

Name:
Jeffrey Lion

	
 

	
 

	
 

	

For Oxis Biotech Inc.:

	
 

	
 

	

 

By: /s/ Anthony J. Cataldo

	
 

	
 

	

Name:
Anthony J. Cataldo

	
 

	
 

	

Title:
Chairman & Chief Executive Officer

	
 

	
 

 

 

15

 

 

SCHEDULE A

 

LICENSED PATENT RIGHTS

 

1.

USSN
13/256,812

 

 

 

 

16

 

SCHEDULE B

 

ASSIGNMENT DOCUMENTS

 

 

 

1.            

Assignment document
from University of Minnesota to Licensor granting exclusive
ownership to patent family of USSN 13/256,812 to
Licensor.

 

 

 

17

 

 

Schedule
C

 

Clinical
Services Agreement (To Be Added Upon Execution of the CSA as per
7.1.1)

 

 

18Exhibit 10.1 

 

EXECUTIVE
RETENTION AGREEMENT

This
Executive Retention Agreement (the “Agreement”) is made and entered into as of August 9, 2017 (the “Effective
Date”) by and between WORKHORSE GROUP INC., a Nevada corporation (the “Company”), and Paul Gaitan
(the “Executive”).

Recitals:

WHEREAS,
the Executive is a key employee of the Company who possesses valuable proprietary knowledge of the Company, its business and operations
and the markets in which the Company competes; and

WHEREAS,
the Company and the Executive desire to enter into this Agreement to encourage the Executive to continue to devote the Executive’s
full attention and dedication to the success of the Company, and to provide specified compensation and benefits to the Executive
in the event of a Termination Upon Change of Control or certain other terminations pursuant to the terms of this Agreement.

NOW,
THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:

1.                 
PURPOSE AND TERM; DUTIES

1.1       The
purpose of this Agreement is to provide specified compensation and benefits to the Executive in the event of (i) a Termination
Upon Change of Control or (ii) an Involuntary Termination. Subject to the terms of any applicable written employment agreement
between Company and the Executive (as to which Executive acknowledges no other such agreement exists as of the date hereof), either
the Executive or Company may terminate the Executive’s employment at any time for any reason, with or without notice. The
term of this Agreement shall be the period from the date set forth above until Executive’s employment is terminated for
any reason or this Agreement is terminated by mutual agreement of the parties.

1.2       The
Executive shall serve as the Chief Financial Officer of the Company. The Executive’s job responsibilities will comprise
managing and overseeing all financial operations and matters of the Company, including the subsidiaries, including but not limited
to:

 

	 	(a)	Timely
                           and accurate annual and quarterly financial reporting in accordance with Securities & Exchange
                           Commission (“SEC”) rules and regulations, applicable law and United States Generally Accepted
                           Accounting Principles (“GAAP”).
	 	 	 
	 	(b)	Management
                           of our Finance Department and oversight of all financial personnel, accounting systems, procedures
                           and policies.
	 	 	 
		(c)	Establishing
                                         and maintaining adequate financial controls, sufficient as a minimum to enable your appropriate
                                         certification of the Company’s annual and quarterly reports in accordance with
                                         SEC rules.

 

    	 	-1-	 

     

    

 

	 	(d)	Managing
                           the treasury functions for the Company, as well as all borrowings, debt facilities and equity fundraising,
                           subject to the approval of the Board (as defined below).
	 	 	 
	 	(e)	Undertaking
                           financial planning for the Company, including preparing annual and other budgets and projections and
                           managing in compliance with such budgets as may be approved by the Board.
	 	 	 
	 	(f)	Monthly
                           management reporting and analysis for the Board.

 

		(g)	Managing
                                         and corresponding with all potential investors with respect to due diligence, documentation
                                         and closing of such financings.
	 	 	 
	 	(h)	Investor
relations to the extent reasonably requested by the CEO.

  

		(i)	All
                                         such functions as are customarily applicable to your position, as well as those that
                                         are reasonably assigned to you by the Company.

 

1.3        The
Executive is entitled to four (4) weeks of vacation which will accrue on a pro-rata basis during the year, in addition to all
public holidays when the office is closed.   Executive will be eligible to participate in all employee benefit plans established
by the Company for its employees from time to time. In accordance with Company policies from time to time, the Company will reimburse
you for all reasonable and proper travel and business expenses incurred by you in the performance of your duties.

 

2.                 
COMPENSATION AND TERMINATION GENERALLY

2.1             
Compensation. 

2.1.1       Annual
Salary. The Executive’s current base salary of $200,000 per annum, subject to periodic review and modification which
may not be adjusted downward by the Company’s Board of Directors (the “Board”) as may be delegated
to the Compensation Committee of the Board (references herein to the Compensation Committee shall include reference to the Board
if no such Committee exists at any time) at such time or times as it shall determine. The Company’s Compensation Committee
shall also from time to time, in its discretion, determine the type and amount of other forms of compensation for Executive’s
service with the Company (including, without limitation, stock options or other forms of equity awards).

2.1.2       Bonuses.
Commencing during the year ended December 31, 2018, Executive will be eligible for bonuses based
on achievement of performance milestones, calculated and payable in an amount equal to 25% of the Base Salary (as amended by the
Board from time to time) (the “Cash Bonus”), which shall be payable during any fiscal year upon the Company generating
75% of its projected revenue set forth in the Company’s budget as established by the Company’s Board of Directors
and management and evidenced by the Company’s financial statements as filed in its Form 10-K Annual Report (the “Revenue
Target”). In the event the Company generates 100% or 125% of its Revenue Target, then the Cash Bonus will be increased to
37.5% and 50% of the Annual Salary, respectively. If such conditions are fulfilled, the Cash Bonus shall be payable with the next
payroll following the latest to occur of the above events, subject to all applicable deductions required by law.

 

    	 	-2-	 

     

    

        

2.1.3       Options.
The Executive will be provided with an initial grant of options to purchase 200,000 shares of common
stock, which shall vest over four (4) years in equal quarterly installments of 12,500 shares per quarter commencing January 1,
2018.  The exercise price of the options shall be $2.74 per share and the term shall be ten years. The Executive may be eligible
for additional equity incentive grants, subject to Executive’s continued employment and satisfactory job performance, which
may be made from time to time, by the Board, on the same terms as other executive employees of the Company. Terms and conditions
of all the equity incentive grants, will be in accordance with the terms of the Company’s Equity Incentive Plan in effect
at the time of each such grant.

 

2.2             
Termination of Employment Generally. In the event the Executive’s employment with the Company terminates, for any
reason whatsoever including death or disability the Executive shall be entitled to the benefits described in this Section 2.2.

2.2.1       
Accrued Salary and Vacation. All salary and accrued vacation earned through the Termination Date shall be paid to Executive
on such date.

2.2.2       
Accrued Bonus Payment. The Executive shall receive a lump sum payment of any actual bonus amount to the extent that all
the conditions for payment of such bonus have been satisfied and any such bonus was earned and is unpaid on the Termination Date.

2.2.3       
Expense Reimbursement. Within ten (10) days following submission to the Company of proper expense reports by the Executive,
the Company shall reimburse the Executive for all expenses incurred by the Executive, consistent with the Company’s expense
reimbursement policy in effect prior to the incurring of each such expense, in connection with the business of the Company prior
to the Termination Date.

2.2.4       Equity
Compensation. The period during which the Executive may exercise any rights (“Exercise Period”)
under any outstanding stock options (or any other equity award, including, without limitation, stock appreciation rights and restricted
stock units) granted to the Executive under any equity incentive plan or agreement adopted by the Board of Directors (the “Company
Plans”) shall continue as set forth in such security; provide, however, such Exercise Period shall terminate immediately
in the event Executive is terminated for Cause. Further, in the event the Executive is terminated for Cause or leaves for any
reason except as set forth in Section 4, then the vesting of all outstanding stock options (or any other equity award, including,
without limitation, stock appreciation rights and restricted stock units) shall cease.

 

3.                 
TERMINATION UPON CHANGE OF CONTROL

3.1             
Severance Payment. In the event of the Executive’s Termination Upon Change of Control at any time after November
9, 2017, the Executive shall be entitled to receive an amount equal to twelve (12) months of Executive’s Base Salary, which
shall be paid according to the following schedule: (i) a lump sum payment equal to one-half of such amount shall be payable within
ten (10) days following the Termination Date, and (ii) one-third of the balance of such amount shall be payable within ten (10)
days of each of the three-month, six-month and nine-month anniversaries of the Termination Date (and in each case no interest
shall accrue on such amount); provided, however, that if Section 409A of the Code would otherwise apply to such cash severance
payment, it instead shall be paid at such time as permitted by Section 409A of the Code. In addition to the foregoing severance
payment, in the event of the Executive’s Termination Upon Change of Control, the Executive shall be entitled to receive,
within ten (10) days following the Termination Upon Change of Control, a lump sum payment equal to one hundred percent (100%)
of (a) any actual bonus amount earned with respect to a previous year to the extent that all the conditions for payment of such
bonus have been satisfied (excluding any requirement to be in employment with the Company as of a given date which is after the
Termination Date) and any such bonus was earned but is unpaid on the Termination Date; and (b) the target bonus then in effect
for the Executive for the year in which such termination occurs, such payment to be prorated to reflect the full number of months
the Executive remained in the employ of the Company; provided, however, that if Section 409A of the Code would otherwise apply
to such cash payment, it instead shall be paid at such time as permitted by Section 409A of the Code. To illustrate, if the Executive’s
target bonus at 100% equals $120,000 for the calendar year and the Executive is terminated on October 15th, then the
foregoing payment shall equal $100,000 (i.e., ten (10) months’ prorated bonus at one hundred percent (100%) with October
counting as a full month worked).

    	 	-3-	 

     

    

3.2             
Equity Compensation Acceleration. Upon the Executive’s Termination Upon Change of Control at any time after November
9, 2017, the vesting and exercisability of all then outstanding stock options (or any other equity award, including, without limitation,
stock appreciation rights and restricted stock units) granted to the Executive under any Company Plans shall be
accelerated as to 100% of the shares subject to any such equity awards granted to the Executive. 

3.3             
COBRA. If the Executive timely elects coverage under the Consolidated Budget Reconciliation Act of 1985, as amended (“COBRA”),
the Company shall continue to provide to the Executive, at the Company’s expense, the Company’s health-related employee
insurance coverage for the employee only as in effect immediately prior to the Executive’s Termination Upon Change of Control
for a period of twelve (12) months following such Termination Upon Change of Control. The date of the “qualifying event”
for the Executive and any dependents shall be the Termination Date. 

3.4             
Indemnification. In the event of the Executive’s Termination Upon Change of Control, (a) the Company shall continue
to indemnify the Executive against all claims related to actions arising prior to the termination of the Executive’s employment
to the fullest extent permitted by law, and (b) if the Executive was covered by the Company’s directors’ and officers’
insurance policy, or an equivalent thereto, (the “D&O Insurance Policy”) immediately prior to the
Change of Control, the Company or its Successor shall continue to provide coverage under a D&O Insurance Policy for not less
than twenty-four (24) months following the Executive’s Termination Upon Change of Control on substantially the same terms
of the D&O Insurance Policy in effect immediately prior to the Change of Control. 

4.                 
INVOLUNTARY TERMINATION

4.1             
Severance Payment. In the event of the Executive’s Involuntary Termination at any time after November 9, 2017, the
Executive shall be entitled to receive an amount equal to twelve (12) months of the Executive’s Base Salary which shall
be paid according to the following schedule: (i) a lump sum payment equal to one-fourth of such amount shall be payable within
ten (10) days following the Termination Date, and (ii) one-fourth of such amount shall be payable within ten (10) days of each
of the three-month, six-month and nine-month anniversaries of the Termination Date (and in each case no interest shall accrue
on such amount); provided, however, that if Section 409A of the Code would otherwise apply to such cash severance payment, it
instead shall be paid at such time as permitted by Section 409A of the Code. In addition to the foregoing severance payment, in
the event of the Executive’s Involuntary Termination, the Executive shall be entitled to receive, within ten (10) days following
the Executive’s Involuntary Termination, a lump sum payment equal to one hundred percent (100%) of (a) any actual bonus
amount earned with respect to a previous year to the extent that all the conditions for payment of such bonus have been satisfied
(excluding any requirement to be in employment with the Company as of a given date which is after the Termination Date) and any
such bonus was earned but is unpaid on the Termination Date; and (b) the target bonus then in effect for the Executive for the
year in which such termination occurs, such payment to be prorated to reflect the full number of months the Executive remained
in the employ of the Company; provided, however, that if Section 409A of the Code would otherwise apply to such cash payment,
it instead shall be paid at such time as permitted by Section 409A of the Code. To illustrate, if the Executive’s target
bonus at 100% equals $120,000 for the calendar year and the Executive is terminated on October 15th, then the foregoing
payment shall equal $100,000 (i.e., ten (10) months’ prorated bonus at one hundred percent (100%) with October counting
as a full month worked).

    	 	-4-	 

     

    

 

4.2             
Equity Compensation Acceleration. Upon the Executive’s Involuntary Termination at any time after November 9, 2017,
the vesting and exercisability of all then outstanding stock options (or any other equity award, including, without limitation,
stock appreciation rights and restricted stock units) granted to the Executive under any Company Plans shall be accelerated as
to 100% of the shares subject to any such equity awards granted to the Executive. 

4.3             
COBRA. In the event of the Executive’s Involuntary Termination, at any time after November 9, 2017, if the Executive
timely elects coverage under the Consolidated Budget Reconciliation Act of 1985, as amended (“COBRA”),
the Company shall continue to provide to the Executive, at the Company’s expense, the Company’s health-related employee
insurance coverage for the employee only as in effect immediately prior to the Executive’s Involuntary Termination for a
period of twelve (12) months following such Involuntary Termination. The date of the “qualifying event” for the Executive
and any dependents shall be the Termination Date. 

4.4             
Indemnification. In the event of the Executive’s Involuntary Termination, (a) the Company shall continue to indemnify
the Executive against all claims related to actions arising prior to the Termination Date to the fullest extent permitted by law,
and (b) if the Executive was covered by the D&O Insurance Policy immediately prior to the Termination Date, the Company shall
continue to provide coverage under a D&O Insurance Policy for not less than twenty-four (24) months following the Executive’s
Involuntary Termination on substantially the same terms of the D&O Insurance Policy in effect immediately prior to the Termination
Date. 

5.                 
FEDERAL EXCISE TAX UNDER SECTION 280G

5.1             
Excise Tax. If (a) any amounts payable to the Executive under this Agreement or otherwise are characterized as excess parachute
payments pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), and
(b) the Executive thereby would be subject to any United States federal excise tax due to that characterization, then if Executive
would thereby be in a better after-tax position, the Company may elect, in the Company’s sole discretion, to reduce the
amounts payable under this Agreement or otherwise, or to have any portion of applicable options or restricted stock not vest or
become exercisable, in order to avoid any “excess parachute payment” under Section 280G(b)(1) of the Code.

    	 	-5-	 

     

    

 

5.2             
Calculation by Independent Public Accountants. Unless the Company and the Executive otherwise agree in writing, any calculation
of the amount of any excess parachute payments payable by the Executive shall be made in writing by the Company’s independent
public accountants (the “Accountants”) whose conclusion shall be final and binding on the parties. For
purposes of making such calculations, the Accountants may rely on reasonable, good faith interpretations concerning the application
of Sections 280G and 4999 of the Code. The Company and the Executive shall furnish to the Accountants such information and documents
as the Accountants may reasonably request in order to make the required calculations. The Company shall bear all fees and expenses
the Accountants may charge in connection with these services, but the engagement of the Accountants for this purpose shall be
pursuant to an agreement between the Executive and the Accountants.

6.                 
DEFINITIONS

6.1             
Capitalized Terms Defined. Capitalized terms used in this Agreement shall have the meanings set forth in this Section 4,
unless the context clearly requires a different meaning.

6.2             
“Base Salary” means the greater of (a) if applicable, the monthly salary of the Executive in effect immediately
prior to the Change of Control, or (b) the monthly salary of the Executive in effect immediately prior to the Termination Date.

6.3             
“Cause” means: 

		(a)	the
                                         Executive willfully failed to follow the lawful written directions of the Board of Directors
                                         of the Company or Executive’s immediate superior; provided that no termination
                                         for such Cause shall occur unless the Executive: (i) has been provided with notice, specifying
                                         such willful failure in reasonable detail, of the Company’s intention to terminate
                                         the Executive for Cause; and (ii) has failed to cure or correct such willful failure
                                         within thirty (30) days of receiving such notice; 

		(b)	the
                                         Executive engaged in gross misconduct, or gross incompetence which is materially detrimental
                                         to the Company; provided that no termination for such Cause shall occur unless the Executive:
                                         (i) has been provided with notice, specifying such gross misconduct or gross incompetence
                                         in reasonable detail, of the Company’s intention to terminate the Executive for
                                         Cause; and (ii) has failed to cure or correct such gross misconduct within thirty (30)
                                         days of receiving such notice; 

		(c)	the
                                         Executive willfully failed to comply in any material respect with the Employee Invention
                                         Assignment & Confidentiality Agreement, the Company’s share dealing code, the
                                         Employee’s non-competition agreement or any other reasonable policies of the Company
                                         where non-compliance would be materially detrimental to the Company; provided that no
                                         termination for such Cause shall occur unless the Executive: (i) has been provided with
                                         notice of the Company’s intention to terminate the Executive for such Cause, and
                                         (ii) has failed to cure or correct such willful failure within thirty (30) days of receiving
                                         such notice, provided that such notice and cure period requirements shall not apply in
                                         the event that such non-compliance is of a nature that it is unable to be remedied; or

    	 	-6-	 

     

    

		(d)	is
                                         convicted of a felony or crime involving moral turpitude (excluding drunk driving unless
                                         combined with other aggravating circumstances or offenses) or commission of a fraud which
                                         the Company reasonably believes would reflect adversely on the Company.

6.4             
“Change of Control” means: 

		(a)	any
                                         “person” (as such term is used in Sections 13(d) and 14(d) of the Securities
                                         Exchange Act of 1934, as amended (the “Exchange Act”)) becomes
                                         the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange
                                         Act), directly or indirectly, of securities of the Company representing fifty (50%) percent
                                         or more of (i) the outstanding shares of common stock of the Company, or (ii) the combined
                                         voting power of the Company’s outstanding securities;

		(b)	the
                                         Company is party to a merger or consolidation, or series of related transactions, which
                                         results in the voting securities of the Company outstanding immediately prior thereto
                                         failing to continue to represent (either by remaining outstanding or by being converted
                                         into voting securities of the surviving entity), directly or indirectly, at least fifty
                                         (50%) percent of the combined voting power of the voting securities of the Company or
                                         such surviving entity outstanding immediately after such merger or consolidation;

		(c)	the
                                         sale or disposition of all or substantially all of the Company’s assets, or consummation
                                         of any transaction, or series of related transactions, having similar effect (other than
                                         to a subsidiary of the Company); 

6.5             
“Company” shall mean Workhorse Group Inc. and, following a Change of Control, any Successor.

6.6             
“Involuntary Termination” means: 

		(a)	any
                                         termination without Cause of the employment of the Executive by the Company; or

		(b)	any
                                         resignation by Executive for Good Reason where such resignation occurs within sixty (60)
                                         days following the occurrence of such Good Reason.

Notwithstanding
the foregoing, the term “Involuntary Termination” shall not include any termination of the employment of the Executive:
(1) by the Company for Cause; (2) by the Company as a result of the Permanent Disability of the Executive; (3) as a result
of the death of the Executive; (4) that occurs within the period of time to qualify as a “Termination Upon Change of Control”;
or (5) as a result of the voluntary termination of employment by the Executive for any reason other than Good Reason.

6.7             
 “Good Reason” means the occurrence of any of the following conditions, without the Executive’s written
consent:

		(a)	Any
                                         act, set of facts or omissions with respect to the Executive that would, as a matter
                                         of applicable law, constitute a constructive termination of the Executive.

    	 	-7-	 

     

    

		(b)	A
                                         reduction in the Executive’s Base Salary or, if applicable, target bonus opportunity
                                         (subject to applicable performance requirements with respect to the actual amount of
                                         bonus compensation earned similar to the applicable performance requirements currently
                                         in effect), and in the event of a Change of Control, as compared to Executive’s
                                         Base Salary and target bonus opportunity in effect immediately prior to the public announcement
                                         of the Change of Control; provided, however, that this clause (c) shall not apply in
                                         the event of a reduction in the Executive’s Base Salary or, if applicable, target
                                         bonus opportunity as part of a Company-wide or executive team-wide cost-cutting measure
                                         or Company-wide or executive team-wide cutback as a result of overall Company performance.
                                         

		(c)	The
                                         failure of the Company (i) to continue to provide the Executive an opportunity to participate
                                         in any benefit or compensation plans provided to employees who hold positions with the
                                         Company comparable to the Executive’s position, (ii) to provide the Executive all
                                         other fringe benefits (or the equivalent) in effect for the benefit of any employee group
                                         which includes any employee who hold a position with the Company comparable to the Executive’s
                                         position, where in the event of a Change of Control, such comparison shall be made relative
                                         to the time immediately prior to the public announcement of such Change of Control);
                                         or (iii) continue to provide director’s and officers’ insurance.

		(d)	A
                                         material breach of this Agreement by the Company, including, in the event of a Change
                                         of Control, failure of the Company to obtain the consent of a Successor to perform all
                                         of the obligations of the Company under this Agreement.

The
Executive must first give the Company an opportunity to cure any of the foregoing within thirty (30) days following delivery to
the Company of a written explanation specifying the specific basis for Executive’s belief that Executive is entitled to
terminate employment for Good Reason, and Executive terminates employment with the Company not later than (30) days following
the Company’s failure to cure.

6.8             
 “Permanent Disability” means that:

		(a)	the
                                         Executive has been incapacitated by bodily injury, illness or disease so as to be prevented
                                         thereby from engaging in the performance of the Executive’s duties;

		(b)	such
                                         total incapacity shall have continued for a period of six consecutive months; and

		(c)	such
                                         incapacity will, in the opinion of a qualified physician, be permanent and continuous
                                         during the remainder of the Executive’s life.

6.9             
Intentionally left blank.

    	 	-8-	 

     

    

6.10         
“Successor” means any successor in interest to, or assignee of, substantially all of the business and assets
of the Company.

6.11         
“Termination Date” means the date of the termination of the Executive’s employment with the Company.

6.12         
“Termination Upon Change of Control” means: 

		(a)	any
                                         termination of the employment of the Executive by the Company without Cause during the
                                         period commencing on or after the date that the Company first publicly announces a definitive
                                         agreement that results in a Change of Control (even though still subject to approval
                                         by the Company’s stockholders and other conditions and contingencies, but provided
                                         that the Change of Control actually occurs) and ending on the date which is twelve (12)
                                         months following the Change of Control; or

		(b)	any
                                         resignation by Executive for Good Reason where (i) such Good Reason occurs during the
                                         period commencing on or after the date that the Company first publicly announces a definitive
                                         agreement that results in a Change of Control (even though still subject to approval
                                         by the Company’s stockholders and other conditions and contingencies, but provided
                                         that the Change of Control actually occurs) and ending on the date which is twelve (12)
                                         months following the Change of Control, and (ii) such resignation occurs at or after
                                         such Change of Control and in any event within six (6) months following the occurrence
                                         of such Good Reason.

Notwithstanding
the foregoing, the term “Termination Upon Change of Control” shall not include any termination of the employment of
the Executive: (1) by the Company for Cause; (2) by the Company as a result of the Permanent Disability of the Executive; (3) as
a result of the death of the Executive; or (4) as a result of the voluntary termination of employment by the Executive for any
reason other than Good Reason.

7.                 
EXCLUSIVE REMEDY

7.1             
No Other Benefits Payable. The Executive shall be entitled to no other termination, severance or change of control compensation,
benefits, or other payments from the Company as a result of any termination with respect to which the payments and benefits described
in Section 2 have been provided to the Executive, except as expressly set forth in this Agreement.

7.2             
No Limitation of Regular Benefit Plans. Except as may be provided elsewhere in this Agreement, this Agreement is not intended
to and shall not affect, limit or terminate any plans, programs or arrangements of the Company that are regularly made available
to a significant number of employees or officers of the Company, including, without limitation, the Company’s stock option
plans.

7.3             
Release of Claims. The payment of the benefits described in Sections 3 and 4 of this Agreement is conditioned upon the
delivery by the Executive to the Company of a signed and effective general release of claims as provided by the Company; provided,
however, that the Executive shall not be required to release any rights the Executive may have to be indemnified by the Company
or as otherwise provided under this Agreement.

    	 	-9-	 

     

    

 

7.4             
Noncumulation of Benefits. The Executive may not cumulate cash severance payments, stock option vesting and exercisability
and restricted stock vesting under this Agreement, any other written agreement with the Company and/or another plan or policy
of the Company. If the Executive has any other binding written agreement with the Company which provides that, upon a Change of
Control or Termination Upon a Change of Control or Involuntary Termination, the Executive shall receive termination, severance
or similar benefits, then no benefits shall be received by Executive under this Agreement unless, prior to payment or receipt
of benefits under this Agreement, the Executive waives Executive’s rights to all such other benefits, in which case this
Agreement shall supersede any such written agreement with respect to such other benefits.

8.                 
NON-COMPETE; PROPRIETARY AND CONFIDENTIAL
INFORMATION

During
the term of this Agreement and following any termination of employment, Executive agrees to continue to abide by the terms and
conditions of each of the non-competition agreement (during the term of such Agreement) and the Employee Invention Assignment
& Confidentiality Agreement between the Executive and the Company.

9.                 
ARBITRATION

9.1             
Disputes Subject to Arbitration. Any claim, dispute or controversy arising out of this Agreement (other than claims relating
to misuse or misappropriation of the intellectual property of the Company), the interpretation, validity or enforceability of
this Agreement or the alleged breach thereof shall be submitted by the parties to binding arbitration by a sole arbitrator under
the rules of the American Arbitration Association; provided, however, that (a) the arbitrator shall have no authority to make
any ruling or judgment that would confer any rights with respect to the trade secrets, confidential and proprietary information
or other intellectual property of the Company upon the Executive or any third party; and (b) this arbitration provision shall
not preclude the Company from seeking legal and equitable relief from any court having jurisdiction with respect to any disputes
or claims relating to or arising out of the misuse or misappropriation of the Company’s intellectual property. Judgment
may be entered on the award of the arbitrator in any court having jurisdiction.

9.2             
Costs of Arbitration. All costs of arbitration, including reasonable attorney’s fees of the Executive, will be borne
by the Company, except that if the Executive initiates arbitration and the arbitrator finds the Executive’s claims to be
frivolous the Executive shall be responsible for his own costs and attorneys fees. 

9.3             
Site of Arbitration. The site of the arbitration proceeding shall be in New York City, New York.

10.             
NOTICES

For
purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or five (5) business days after being mailed, return receipt requested, as follows:
(a) if to the Company, attention: Chief Executive Officer, at the Company’s offices at 100 Commerce Blvd., Loveland, OH
45140 and, (b) if to the Executive, at the address indicated below or such other address specified by the Executive in writing
to the Company. Either party may provide the other with notices of change of address, which shall be effective upon receipt.

    	 	-10-	 

     

    

 

11.       MISCELLANEOUS
PROVISIONS

11.1       Heirs
and Representatives of the Executive; Successors and Assigns of the Company. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the Executive’s personal and legal representatives, executors, administrators,
successors, heirs, distributees, devises and legatees. This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the successors and assigns of the Company.

11.2       Amendment
and Waiver. No provision of this Agreement shall be modified, amended, waived or discharged unless the modification, amendment,
waiver or discharge is agreed to in writing, specifying such modification, amendment, waiver or discharge, and signed by the Executive
and by an authorized officer of the Company (other than the Executive). No waiver by either party of any breach of, or of compliance
with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision
or of the same condition or provision at another time.

11.3       Withholding
Taxes. All payments made under this Agreement shall be subject to deduction of all federal, state, local and other taxes required
to be withheld by applicable law.

11.4       Severability.
The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability
of any other provision hereof, which shall remain in full force and effect.

11.5       Choice
of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the
State of Ohio, without regard to where the Executive has his residence or principal office or where he performs his duties hereunder.

11.6       No
Duty to Mitigate. The Executive is not required to seek alternative employment following termination, and payments called
for under this Agreement will not be reduced by earnings from any other source.

11.7.       Section
409A of the Code. To the extent (a) any payments or benefits to which Employee becomes entitled under this Agreement, or under
any agreement or plan referenced herein, in connection with Employee’s termination of employment with the Company constitute
deferred compensation subject to Section 409A of the Code and (b) Employee is deemed at the time of such termination of employment
to be a “specified employee” under Section 409A of the Code, then such payments shall not be made or commence until
the earliest of (i) the expiration of the six (6)-month period measured from the date of Employee’s “separation from
service” (as such term is at the time defined in Treasury Regulations under Section 409A of the Code) from the Company;
or (ii) the date of Employee’s death following such separation from service; provided, however, that such deferral shall
only be effected to the extent required to avoid adverse tax treatment to Employee, including (without limitation) the additional
twenty percent (20%) tax for which Employee would otherwise be liable under Section 409A(a)(1)(B) of the Code in the absence of
such deferral. Upon the expiration of the applicable deferral period, any payments which would have otherwise been made during
that period (whether in a single sum or in installments) in the absence of this paragraph shall be paid to Employee or Employee’s
beneficiary in one lump sum (without interest). Any termination of Employee’s employment is intended to constitute a “separation
from service” as such term is defined in Treasury Regulation Section 1.409A-1. It is intended that each installment of the
payments provided hereunder constitute separate “payments” for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i).
It is further intended that payments hereunder satisfy, to the greatest extent possible, the exemption from the application of
Code Section 409A (and any state law of similar effect) provided under Treasury Regulation Section 1.409A-1(b)(4) (as a “short-term
deferral”).

    	 	-11-	 

     

    

 

11.8       Entire
Agreement. This Agreement represents the entire agreement and understanding between the parties as to the subject matter herein
(whether oral or written and whether express or implied).

 

[SIGNATURE
PAGE TO EXECUTIVE RETENTION AGREEMENT FOLLOWS]

    	 	-12-	 

     

    

 

In
Witness Whereof, each of the parties has executed
this Agreement, in the case of the Company, by its duly authorized officer, as of the day and year first above written.

 

	 	Executive
	 	 	 
	 	/s/Paul Gaitan
	 	Paul Gaitan
	 	 	 
	 	 	 
	 	 	 
	 	Workhorse Group Inc.
	 	 	 
	 	 	 
	 	By: 	/s/ Stephen S. Burns
	 	Name: 	Stephen S. Burns
	 	Title: 	Chief Executive Officer

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