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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 14, 2024 (May 8, 2024)
| 1847 Holdings LLC |
| (Exact name of registrant as specified in its charter) |
| Delaware |
|
001-41368 |
|
38-3922937 |
(State or other jurisdiction
of incorporation) |
|
(Commission File Number) |
|
(IRS Employer
Identification No.) |
| 590 Madison Avenue, 21st Floor, New York, NY |
|
10022 |
| (Address of principal executive offices) |
|
(Zip Code) |
| (212) 417-9800 |
| (Registrant's telephone number, including area code) |
| |
| (Former name or former address, if changed since last report.) |
Check the appropriate box below if the Form 8-K
filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant
to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant
to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
| Common Shares |
|
EFSH |
|
NYSE American LLC |
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act. ☐
Item 1.01 Entry into a Material Definitive Agreement.
On May 8, 2024, 1847 Holdings LLC (the “Company”)
entered into a securities purchase agreement (the “Purchase Agreement”) with an accredited investor (the “Investor”),
pursuant to which the Company issued and sold to the Investor a 20% OID subordinated promissory note in the principal amount of $625,000
(the “Note”) and a warrant for the purchase of 92,937 common shares (the “Warrant”) for a total
purchase price of $500,000 in a private placement transaction (the “Private Placement”).
The Note is due and payable on August 8, 2024.
The Company may voluntarily prepay the Note in full at any time. In addition, if the Company consummates any sale of a material amount
of assets of the Company or any of its subsidiaries, then the net proceeds thereof shall be applied to the payment or prepayment of the
Note. The Note is unsecured and has priority over all other unsecured indebtedness of the Company, except for certain Senior Indebtedness
(as defined in the Note). The Note contains customary affirmative and negative covenants and events of default for a loan of this type.
Subject to Shareholder Approval (as defined below),
the Note is convertible into common shares at the option of the holder at any time on or following the date that an Event of Default (as
defined in the Note) occurs at a conversion price equal to 90% of the lowest volume weighted average price of the Company’s common
shares on any trading day during the five (5) trading days prior to the conversion date; provided that such conversion price shall not
be less than $0.01. The conversion price of the Note is subject to standard adjustments, including a price-based adjustment in the event
that the Company issues any common shares or other securities convertible into or exercisable for common shares at an effective price
per share that is lower than the conversion price, subject to certain exceptions.
The Warrant is exercisable at any time on or after
the date that is the six months after the date of issuance and until the fifth anniversary thereof at an exercise price of $2.69 (subject
to standard adjustments for share splits, share combinations, share dividends, reclassifications, mergers, consolidations, reorganizations
and similar transactions) and may be exercised on a cashless basis if at the time of exercise there is no effective registration statement
registering, or the prospectus contained therein is not available for, the issuance of common shares upon exercise thereof.
Pursuant to the Purchase Agreement, the Company
is required to hold a special meeting of its shareholders on or before the date that is ninety (90) calendar days after an Event of Default
occurs for the purpose of obtaining shareholder approval of the issuance of all common shares underlying the Note in excess of 1,058,040
common shares, or 19.99% of the common shares outstanding as of the date of the Note (“Shareholder Approval”). In addition,
the Note and the Warrant contain an ownership limitation, such that the Company shall not effect any conversion or exercise, and the holder
shall not have the right to convert or exercise, any portion of the Note or the Warrant to the extent that after giving effect to the
issuance of common shares upon conversion or exercise, such holder, together with its affiliates and any other persons acting as a group
together with such holder or any of its affiliates, would beneficially own in excess of 4.99% of the number of common shares outstanding
immediately after giving effect to the issuance of common shares upon conversion or exercise, which such percentage may be increased or
decreased by the holder, but not in excess of 9.99%, upon at least 61 days’ prior notice to the Company.
In connection with the Private Placement, the
Company also entered into a registration rights agreement with the Investor (the “Registration Rights Agreement”),
pursuant to which the Company agreed to file a registration statement to register all common shares underlying the Note and the Warrant
under the Securities Act of 1933, as amended, by May 31, 2024 and use its best efforts to cause such registration statement to be declared
effective within ninety (90) days after the filing thereof. If the Company fails to meet these deadlines or comply with certain other
requirements in the Registration Rights Agreement, then on each date that the Company fails to comply, and on each monthly anniversary
thereof, the Company shall pay to the Investor an amount in cash, as partial liquidated damages and not as a penalty, equal to 1.0% of
the aggregate subscription amount paid by the Investor, subject to an aggregate cap of 10%. If the Company fails to pay any of these amounts
in full within seven (7) days after the date payable, the Company must pay interest thereon at a rate of 18% per annum (or such lesser
maximum amount that is permitted to be paid by applicable law).
Spartan Capital Securities, LLC acted as placement
agent in connection with the Private Placement and received a warrant for the purchase of a number of common shares equal to eight percent
(8%) of the number common shares initially issuable upon conversion of the Note and exercise of the Warrant at an exercise price of $2.959
per share (subject to adjustment), which is exercisable at any time on or after the date that is the six months after the date of issuance
and until the fifth anniversary thereof (the “Placement Agent Warrant”).
The foregoing description of the Purchase Agreement,
the Note, the Warrant, the Registration Rights Agreement and the Placement Agent Warrant does not purport to be complete and is qualified
in its entirety by reference to the full text of those documents filed as exhibits to this report, which are incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth
under Item 1.01 is incorporated by reference into this Item 2.03.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth under Item 1.01 regarding
the issuance of the Note, the Warrant and the Placement Agent Warrant is incorporated by reference into this Item 3.02. The issuance of
these securities is being made in reliance upon an exemption from the registration requirements of Section 5 of the Securities Act.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
| Date: May 14, 2024 |
1847 HOLDINGS LLC |
| |
|
| |
/s/ Ellery W. Roberts |
| |
Name: |
Ellery W. Roberts |
| |
Title: |
Chief Executive Officer |
3
Exhibit 4.1
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. 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 SHARE PURCHASE WARRANT
1847 HOLDINGS LLC
| Warrant Shares: 92,937 |
Initial Issue Date: May 8, 2024 |
This COMMON SHARE PURCHASE
WARRANT (this “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 that is the six-months (the “Initial Exercise Date”) after the Initial Issue Date set forth hereinabove (the
“Initial Issue Date”) and until the earlier of the fifth anniversary of the Initial Issue Date and the date that this
Warrant is exercised in full (as the case may be, the “Termination Date”) but not thereafter, to subscribe for and
purchase from 1847 Holdings LLC, a limited liability company formed under the laws of the State of Delaware (the “Company”),
up to 92,937 (as subject to adjustment hereunder, the “Warrant Shares”) of the common shares, no par value, of the
Company (the “Common Shares”). The purchase price of one Common Share 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 as of May 8, 2024, among the Company and the purchasers signatory thereto.
Section 2. Exercise.
(a) Exercise
of Warrant. 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 of a duly executed facsimile copy
or PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”).
Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined
in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver to the Company the aggregate Exercise
Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States
bank unless 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 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 within three (3) Trading Days of the date
on which 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 to the Holder any objection to any Notice
of Exercise within one (1) Trading 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 of this Warrant is equal to $2.69 per Common Share (the “Exercise Price”).
(c) Cashless
Exercise. If at the time of exercise hereof 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, 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 number of Warrant
Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = as
applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise
is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and
delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined
in Rule 600(b) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder,
either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the
Common Shares on the principal Trading Market as reported by Bloomberg L.P. (“Bloomberg”) as of the time of the Holder’s
execution of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a
Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading
hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise
if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section
2(a) hereof after the close of “regular trading hours” on such Trading Day;
(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).
“Bid Price”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Shares are then listed
or quoted on a Trading Market, the bid price of the Common Shares for the time in question (or the nearest preceding date) on the Trading
Market on which the Common Shares are then listed or quoted as reported by Bloomberg (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 Shares for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Shares are not then listed
or quoted for trading on OTCQB or OTCQX and if prices for the Common Shares are then reported on The Pink Open Market (or a similar organization
or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Shares so reported, or (d)
in all other cases, the fair market value of a Common Share 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.
“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Shares are then listed
or quoted on a Trading Market, the daily volume weighted average price of the Common Share for such date (or the nearest preceding date)
on the Trading Market on which the Common Shares are then listed or quoted as reported by Bloomberg (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 Shares for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Shares are
not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Shares are then reported on The Pink Open Market
(or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per Common Share so reported,
or (d) in all other cases, the fair market value of a s Common Share 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.
(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 the earliest
of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the
aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period 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 that payment of the aggregate
Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the
number of Trading Days comprising the Standard Settlement Period following 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 Shares 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 the Warrant Share Delivery Date) 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. As used herein, “Standard Settlement Period”
means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect
to the Common Shares as in effect on the date of delivery of the Notice of Exercise. Notwithstanding the foregoing, with respect to any
Notice(s) of Exercise delivered on or prior to 12:00 p.m. (New York City time) on the Initial Exercise Date, which may be delivered at
any time after the time of execution of the Purchase Agreement, the Company agrees to deliver the Warrant Shares subject to such notice(s)
by 4:00 p.m. (New York City time) on the Initial Exercise Date and the Initial Exercise Date shall be the Warrant Share Delivery Date
for purposes hereunder, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received
by such Warrant Share Delivery Date.
(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, Common
Shares 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 Common Shares 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 Common Shares that would have been issued had the Company timely
complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Shares having a total purchase
price of $11,000 to cover a Buy-In with respect to an attempted exercise Common Shares 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 written notice indicating the 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 the Common Shares 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 Common Shares beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of Common
Shares issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of
Common Shares which would be issuable upon (i) exercise of the remaining, non-exercised 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 non-converted portion
of any other securities of the Company (including, without limitation, any other Common Share 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 Common Shares, a Holder may rely on the
number of outstanding Common Shares 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 Common Shares outstanding. Upon the written or oral request of a Holder, the Company shall within one
Trading Day confirm orally and in writing to the Holder the number of Common Shares then outstanding. In any case, the number of outstanding
Common Shares 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 Common Shares was reported.
The “Beneficial Ownership Limitation” shall be 4.99% of the number of Common Shares outstanding immediately after giving
effect to the issuance of Common Shares 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 Common Shares outstanding immediately after giving effect to the issuance of Common Shares
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 its Common Shares payable in Common Shares (which, for avoidance of doubt, shall not include any Common
Shares issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding Common Shares into a larger number of shares,
(iii) combines (including by way of reverse stock split) outstanding Common Shares into a smaller number of shares, or (iv) issues by
reclassification of the Common Shares 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 Common Shares (excluding treasury shares, if any) outstanding immediately
before such event and of which the denominator shall be the number of Common Shares 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 shareholders 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
Rights Offerings. In addition to (but without duplication of) any adjustments pursuant to Section 3(a) above, if at any time
the Company grants, issues or sells any Common Share Equivalents or rights to purchase stock, warrants, securities or other property pro
rata to the record holders of any class of Common Shares (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 Common Shares 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 Common
Shares are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, 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 Common Shares 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).
(c) 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 Common Shares, 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 Common Shares 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 Common Shares are to be determined for the participation in such Distribution (provided, however,
that, 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 Common Shares 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).
(d) 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, (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 Shares 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 Shares, (iv) the Company, directly or indirectly,
in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Shares or any compulsory
share exchange pursuant to which the Common Shares are 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, merger or scheme of arrangement) with
another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding Common Shares or becomes
the beneficial owner of 50% of the voting power represented by the outstanding Common Shares (not including any Common Shares 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 common shares 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 Common Shares 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 Common Share 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 Shares 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 30 days after, the consummation of the Fundamental Transaction (or, if later, the date of the public
announcement of the applicable Fundamental Transaction), purchase this Warrant from the Holder by paying to the Holder an amount of cash
equal to the Black Scholes Value (as defined below) of the remaining unexercised portion of this Warrant on the date of the consummation
of such Fundamental Transaction; provided, however, that, if the Fundamental Transaction is not within the Company’s
control, including not approved by the Company’s Board of Directors, the Holder shall only be entitled to receive from the Company
or any Successor Entity the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised
portion of this Warrant, that is being offered and paid to the holders of Common Shares of the Company in connection with the Fundamental
Transaction, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Shares
are given the choice to receive from among alternative forms of consideration in connection with the Fundamental Transaction; provided,
further, that if holders of Common Shares of the Company are not offered or paid any consideration in such Fundamental Transaction,
such holders of Common Shares will be deemed to have received common stock of the Successor Entity (which entity may be the Company following
such Fundamental Transaction) in such Fundamental Transaction. “Black Scholes Value” means the value of this Warrant
based on the Black-Scholes Option Pricing Model obtained from the “OV” function on 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 contemplated Fundamental Transaction
and the Termination Date, (B) an expected volatility equal to the greater of (1) the 30 day volatility, (2) the 100 day volatility or
(3) the 365 day volatility, each of clauses (1)-(3) as obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization
factor) as of the Trading Day immediately following the public announcement of the applicable contemplated Fundamental Transaction, (C)
the underlying price per share used in such calculation shall be the highest VWAP during the period beginning on the Trading Day immediately
preceding the public announcement of the applicable contemplated Fundamental Transaction (or the consummation of the applicable Fundamental
Transaction, if earlier) and ending on the Trading Day of the Holder’s request pursuant to this Section 3(d) and (D) a remaining
option time equal to the time between the date of the public announcement of the applicable contemplated Fundamental Transaction and the
Termination Date and (E) a zero cost of borrow. The payment of the Black Scholes Value will be made by wire transfer of immediately available
funds (or such other consideration) within the later of (i) five Trading Days of the Holder’s election and (ii) the date of consummation
of the Fundamental Transaction. 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(d) 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 Common Shares 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 Common Shares 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.
(e) Calculations.
All calculations under this Section 3 shall be made by the Company 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 Common Shares deemed to be issued and outstanding as of a given date
shall be the sum of the number of Common Shares (excluding treasury shares, if any) issued and outstanding.
(f) 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 and to the Company, 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
Shares, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Shares, (C) the Company shall
authorize the granting to all holders of the Common Shares 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 shareholders of the Company shall be required in connection with any reclassification
of the Common Shares, any consolidation or merger to which the Company (or any of its Subsidiaries) 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 Shares 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 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
Shares 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 Common Shares of record shall be entitled to exchange their Common Shares 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.
(g) Voluntary
Adjustment By Company. Subject to the rules and regulations of the Trading Market, the Company may at any time during the term of
this Warrant, subject to the prior written consent of the Holder, reduce the then current Exercise Price to any amount and for any period
of time deemed appropriate by the board of directors of the Company.
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 office of the Company designated for such purpose, 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 on which the Holder delivers an Assignment Form to the Company assigning
this Warrant in 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.
Section 5. Miscellaneous.
(a) No
Rights as Shareholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends
or other rights as a shareholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly
set forth in Section 3. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise”
pursuant to Section 2(c) or to receive cash payments pursuant to Section 2(d)(i) and Section 2(d)(iv) herein, in
no event shall the Company be required to net cash settle an exercise of this Warrant.
(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, 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 Trading Day, then such action may be taken or such right may be exercised on the next succeeding Trading Day.
(d) Authorized
Shares. The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued
Common Shares 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 issuing 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 Shares 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 non-assessable 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 non-assessable 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, and the Holder does not
utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
(g) Non-waiver
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, 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 Shares or as a shareholder 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
and Waiver. The terms of this Warrant may be amended or waived (either generally or in a particular instance and either retroactively
or prospectively) only 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.
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1847 HOLDINGS LLC |
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By: |
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Name: |
Ellery W. Roberts |
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Title: |
Chief Executive Officer |
NOTICE OF EXERCISE
TO: 1847 HOLDINGS LLC
(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 Holder:
Signature of Authorized Signatory of Holder:
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:
Address:
Phone Number:
Email Address:
Tax ID:
[SIGNATURE OF HOLDER]
Name of Holder:
Signature of Authorized Signatory of Holder:
Name of Authorized Signatory:
Title of Authorized Signatory:
Date:
13
Exhibit 4.2
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. 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 SHARE PURCHASE WARRANT
1847 HOLDINGS LLC
Initial Issue Date: May 8, 2024
This COMMON SHARE PURCHASE
WARRANT (this “Warrant”) certifies that, for value received, SPARTAN CAPITAL SECURITIES, LLC 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 that is the six-months (the “Initial Exercise Date”) after the Initial Issue Date set forth hereinabove (the
“Initial Issue Date”) and until the earlier of the fifth anniversary of the Initial Issue Date and the date that this
Warrant is exercised in full (as the case may be, the “Termination Date”) but not thereafter, to subscribe for and
purchase from 1847 Holdings LLC, a limited liability company formed under the laws of the State of Delaware (the “Company”),
up to the Initial Number of Shares (as subject to adjustment hereunder, the “Warrant Shares”) of the common shares,
no par value, of the Company (the “Common Shares”). The purchase price of one Common Share under this Warrant shall
be equal to the Exercise Price, as defined in Section 2(b).
In this Warrant, the term
“Initial Warrant Number of Shares” is the product of (i) eight percent (8%) and (ii) the sum of number of the aggregate
number of Conversion Shares and Warrant Shares initially issuable under the Notes and Warrants (respectively) issued under the Purchase
Agreement.
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 as of May 8, 2024, among the Company and the purchasers signatory thereto.
Section 2. Exercise.
(a) Exercise
of Warrant. Subject to Equityholder Approval, 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 of
a duly executed facsimile copy or PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto
(the “Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising
the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall
deliver to the Company the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or
cashier’s check drawn on a United States bank. 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 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 within three (3) Trading Days of the date on which 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 to the Holder any objection to any Notice of Exercise within one (1) Trading 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 of this Warrant is $2.959 per Common Share (the “Initial Exercise Price”; and as subject
to adjustment hereunder, the “Exercise Price”).
(c) Registration
Rights. The Company shall include all Warrant Shares on: (i) the next registration statement filed by the Company under the Securities
Act with the Commission; (ii) the subsequent registration statement if such previous registration statement is withdrawn, and (iii) any
amendment to any registration statement previously filed but not effective as of the Initial Exercise Date.
(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 there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder,
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 the earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice
of Exercise, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days
comprising the Standard Settlement Period 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 that payment of the aggregate Exercise Price is received within the earlier of (i) two (2) Trading Days
and (ii) the number of Trading Days comprising the Standard Settlement Period following 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 Shares 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 the Warrant Share Delivery Date) 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. As used herein, “Standard Settlement
Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading
Market with respect to the Common Shares as in effect on the date of delivery of the Notice of Exercise. Notwithstanding the foregoing,
with respect to any Notice(s) of Exercise delivered on or prior to 12:00 p.m. (New York City time) on the Initial Exercise Date, which
may be delivered at any time after the time of execution of the Purchase Agreement, the Company agrees to deliver the Warrant Shares subject
to such notice(s) by 4:00 p.m. (New York City time) on the Initial Exercise Date and the Initial Exercise Date shall be the Warrant Share
Delivery Date for purposes hereunder, provided that payment of the aggregate Exercise Price is received by such Warrant Share Delivery
Date.
(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, 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, Common
Shares 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 Common Shares 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 Common Shares that would have been issued had the Company timely
complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Shares having a total purchase
price of $11,000 to cover a Buy-In with respect to an attempted exercise Common Shares 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 written notice indicating the 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 the Common Shares 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 Common Shares beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of Common
Shares issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of
Common Shares which would be issuable upon (i) exercise of the remaining, non-exercised 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 non-converted portion
of any other securities of the Company (including, without limitation, any other Common Share 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 not have an 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 Common Shares, a Holder may rely on the
number of outstanding Common Shares 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 Common Shares outstanding. Upon the written or oral request of a Holder, the Company shall within one
Trading Day confirm orally and in writing to the Holder the number of Common Shares then outstanding. In any case, the number of outstanding
Common Shares 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 Common Shares was reported.
The “Beneficial Ownership Limitation” shall be 4.99% (or, upon election by a Holder in compliance with this Section
2(e) prior to the issuance of any Warrants, 9.99%) of the number of Common Shares outstanding immediately after giving effect to the
issuance of Common Shares 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 Common Shares outstanding immediately after giving effect to the issuance of Common Shares 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 its Common Shares payable in Common Shares (which, for avoidance of doubt, shall not include any Common
Shares issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding Common Shares into a larger number of shares,
(iii) combines (including by way of reverse stock split) outstanding Common Shares into a smaller number of shares, or (iv) issues by
reclassification of the Common Shares 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 Common Shares (excluding treasury shares, if any) outstanding immediately
before such event and of which the denominator shall be the number of Common Shares 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 shareholders 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
Rights Offerings. In addition to (but without duplication of) any adjustments pursuant to Section 3(a) above, if at any time
the Company grants, issues or sells any Common Share Equivalents or rights to purchase stock, warrants, securities or other property pro
rata to the record holders of any class of Common Shares (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 Common Shares 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 Common
Shares are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, 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 Common Shares 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).
(c) 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 Common Shares, 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 Common Shares 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 Common Shares are to be determined for the participation in such Distribution (provided, however,
that, 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 Common Shares 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).
(d) 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, (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 Shares 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 Shares, (iv) the Company, directly or indirectly,
in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Shares or any compulsory
share exchange pursuant to which the Common Shares are 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, merger or scheme of arrangement) with
another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding Common Shares or becomes
the beneficial owner of 50% of the voting power represented by the outstanding Common Shares (not including any Common Shares 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 common shares 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 Common Shares 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 Common Share 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 Shares 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. 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(d) 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 Common Shares
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 Common Shares 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.
(e) Calculations.
All calculations under this Section 3 shall be made by the Company 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 Common Shares deemed to be issued and outstanding as of a given date
shall be the sum of the number of Common Shares (excluding treasury shares, if any) issued and outstanding.
(f) 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 and to the Company (in accordance with the Purchase
Agreement), 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
Shares, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Shares, (C) the Company shall
authorize the granting to all holders of the Common Shares 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 shareholders of the Company shall be required in connection with any reclassification
of the Common Shares, any consolidation or merger to which the Company (or any of its Subsidiaries) 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 Shares 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 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 Shares 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 Common Shares of record shall be entitled to exchange their Common Shares 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.
(g) Voluntary
Adjustment By Company. Subject to the rules and regulations of the Trading Market, the Company may at any time during the term of
this Warrant, subject to the prior written consent of the Holder, reduce the then current Exercise Price to any amount and for any period
of time deemed appropriate by the board of directors of the Company.
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 office of the Company designated for such purpose, 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 on which the Holder delivers an Assignment Form to the Company assigning
this Warrant in 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.
Section 5. Miscellaneous.
(a) No
Rights as Shareholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends
or other rights as a shareholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly
set forth in Section 3. Without limiting any rights of a Holder to receive cash payments pursuant to Section 2(d)(i) and
Section 2(d)(iv) herein, in no event shall the Company be required to net cash settle an exercise of this Warrant.
(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, 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 Trading Day, then such action may be taken or such right may be exercised on the next succeeding Trading Day.
(d) Authorized
Shares. The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued
Common Shares 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 issuing 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 Shares 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 non-assessable 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 non-assessable 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) Non-waiver
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, 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 Shares or as a shareholder 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 amended and the observance of any term of this Warrant may be waived only to the extent agreed to in writing by 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.
| |
1847 HOLDINGS LLC |
| |
|
|
| |
By: |
/s/ Ellery W. Roberts |
| |
Name: |
Ellery W. Roberts |
| |
Title: |
Chief Executive Officer |
NOTICE OF EXERCISE
TO: 1847 HOLDINGS LLC
(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 in lawful money of the United States; or
(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 Holder:___________________________________________________________________________________
Signature of Authorized Signatory of Holder: ____________________________________________________________
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:___________________________________________________________________________________________
Address:_________________________________________________________________________________________
Phone Number: _______________________
Email Address: _______________________
Tax ID: ______________________________
[SIGNATURE OF HOLDER]
Name of Holder:___________________________________________________________________________________
Signature of Authorized Signatory of Holder: ____________________________________________________________
Name of Authorized Signatory:_______________________________________
Title of Authorized Signatory:_______________________________________
Date: _______________
12
Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement
(this “Agreement”) is dated as of May 8, 2024 and is by and between 1847 Holdings LLC, a Delaware limited liability
company (the “Company”), and each purchaser identified on the Annex A hereto (each, including
its successors and assigns, an “Investor” or “Holder”) and collectively, the “Investors”).
WHEREAS, the Investors
wish to purchase from the Company, and the Company wishes to sell and issue to the Investors: (i) its 20% original issue discount subordinated
notes in the form of Appendix B hereto (each, a “Note”; and collectively, the “Notes”)
in an aggregate original principal amount of $500,000, and (ii) Warrants to purchase Common Shares of the Company in the form of Appendix
C hereto (each, a “Warrant”; and collectively, the “Warrants”);
WHEREAS, Spartan Capital
Securities, LLC (the “Placement Agent”) is acting as the exclusive placement agent for the offering of the Notes and
Warrants contemplated by this Agreement (“Offering”); and
WHEREAS, the Company
and Investors are executing and delivering this Agreement in reliance upon an exemption from securities registration requirements of the
Securities Act of 1933, as amended, afforded by the provisions of Section 4(a)(2) and/or Rule 506(b) of Regulation D promulgated thereunder
by the U.S. Securities and Exchange Commission;
NOW, THEREFORE, in
consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the Company and each Investor agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.
In addition to the terms defined elsewhere in this Agreement: capitalized terms that are not otherwise defined herein have the meanings
given to such terms in the Notes (as defined herein), and (b) the following terms have the meanings set forth in this Agreement.
“$” means
United States Dollars.
“Action”
has the meaning ascribed to such term in Section 3.01(j).
“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“Board of Directors”
means the board of managers or directors of the Company.
“Business Day”
means any day except Saturday, Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions
in the State of New York are authorized or required by law or other governmental action to close. 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.
“Closing”
means the closing of the purchase and sale of the Securities pursuant to Section 2.01.
“Closing Date”
means for any Securities, the Business Day when all of the Transaction Documents for such Securities have been executed and delivered
by the applicable parties thereto, and conditions precedent to: (i) the applicable Investors’ obligations to pay the Subscription
Amount and (ii) the Company’s obligations to deliver such Securities have been satisfied or waived.
SECURITIES PURCHASE AGREEMENT
“Commission”
means the U.S. Securities and Exchange Commission.
“Common Shares”
means the Common Shares, without par value, of the Company, and any other class of securities into which such securities may hereafter
be reclassified or changed.
“Common Shares Equivalent”
means any warrant, note, option or similar security or other right to subscribe for or purchase any additional Common Shares or any other
such security.
“Confidential Investor
Questionnaire” means the Confidential Investor Questionnaire attached as Appendix A hereto.
“Conversion Shares”
means the Common Shares and/or other securities issuable upon conversion of the Notes following an Event of Default (as defined therein)
thereunder.
“Equityholder Approval”
has the meaning set forth in Section 4.07.
“Excluded Debt”
means any (i) promissory notes issued to owners of businesses to finance the acquisition of any business, property or assets by the Company
or any of its Subsidiaries, (ii) debt incurred to finance the acquisition of any business, (iii) debt incurred for working capital purposes
of the Company or any of its Subsidiaries, and (iv) debt incurred in connection with the refinancing of existing indebtedness; provided
that such debt does not increase or expand the collateral securing the refinanced debt, does not exceed the amount of the refinanced debt
and does not contain terms more onerous to the Company and its Subsidiaries with respect to payment, prepayment and interest rate than
the refinanced debt.
“Exempt Issuance”
means: (i) the Securities to be sold hereunder, (ii) the issuance by the Company of Common Shares upon the exercise of an outstanding
stock option or warrant or the conversion of a security outstanding on the date hereof, of which the Placement Agent has been advised
by the Company prior to the date hereof, (iii) any issuance of securities disclosed in the SEC Reports, (iv) Common Shares paid as dividends
on the Company’s series A senior convertible preferred shares and the series B senior convertible preferred shares, (v) securities
issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company or securities
issued in financing transactions, the primary purpose of which is to finance acquisitions or strategic transactions approved by a majority
of the disinterested directors of the Company, (vi) the issuance of securities issued as part of the purchase price in connection with
acquisitions or strategic transactions approved a majority of the disinterested directors of the Company, or securities issued in financing
transactions, the primary purpose of which is to finance acquisitions or strategic transactions approved a majority of the disinterested
directors of the Company, (vii) Common Shares, options or convertible securities issued to banks, equipment lessors or other financial
institutions or other lenders, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction,
approved by a majority of the disinterested directors of the Company, but shall not include a transaction in which the Company is primarily
issuing such securities primarily for the purpose of raising capital or to a person or an entity whose primary business is investing in
securities, (viii) Common Shares, options or convertible securities issued to in connection with the provision of goods or services pursuant
to transactions approved by a majority of the disinterested directors of the Company, but shall not include a transaction in which the
Company is primarily issuing such securities primarily for the purpose of raising capital or to a person or an entity whose primary business
is investing in securities, (ix) Common Shares, options or convertible securities issued in connection with sponsored research, collaboration,
technology license, development, investor or public relations, marketing or other similar agreements or strategic partnerships approved
a majority of the disinterested directors of the Company, but shall not include a transaction in which the Company is primarily issuing
such securities primarily for the purpose of raising capital or to a person or an entity whose primary business is investing in securities,
or (x) the issuance by the Company of any Common Shares or standard options to purchase Common Shares to directors, officers, employees
or consultants of the Company or its subsidiaries in their capacity as such pursuant to an Approved Stock Plan (as defined below). “Approved
Stock Plan” means any employee benefit plan which has been approved by the board of directors of the Company prior to or subsequent
to the date hereof pursuant to which Common Shares and standard options to purchase Common Shares may be issued to any employee, officer,
director or consultant for services provided to the Company or its subsidiaries in their capacity as such.
SECURITIES PURCHASE AGREEMENT
“Exchange Act”
means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“GAAP”
has the meaning ascribed to such term in Section 3.01(h).
“Intellectual Property
Rights” has the meaning ascribed to such term in Section 3.01(o).
“Legend Removal Date”
has the meaning ascribed to such term in Section 4.01(c).
“Lien”
has the meaning ascribed to it in the Note.
“Material Adverse
Effect” has the meaning ascribed to such term in Section 3.01(b).
“Notes”
has the meaning provided in the recitals hereof.
“Original Issue Discount”
and “OID” mean twenty percent (20%).
“Original Principal
Amount” means, with respect to any Investor’s Note(s), the amount obtained by dividing: (i) such Investor’s
Subscription Amount under this Agreement by (ii) 100% minus the OID, or 80%.
“Permitted Liens”
has the meaning ascribed to such term in the Note.
“Placement Agent”
has the meaning ascribed to such term in the recitals hereof.
“Placement Agent
Warrant” shall mean a warrant to purchase a number of Common Shares initially equal to eight percent (8%) of the initial number
of Underlying Securities substantially in the form of the Warrants except that the Placement Agent Warrant will have an exercise price
equal to 110% of the Initial Exercise Price under (and as defined in) the Warrants.
“Person”
means an individual or corporation, partnership, trust, incorporated or un-incorporated association, joint-venture, limited liability
company, joint-stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
“Registration Rights
Agreement” means the Registration Rights Agreement in the form of Appendix D attached hereto.
“Required Approvals”
has the meaning ascribed to such term in Section 3.01(e)).
“Required Minimum”
means, as of any date after the Closing Date, the amount that is the amount that is three times (3x) the maximum aggregate number of Warrant
Shares and Conversion Shares potentially issuable in the future upon conversion of outstanding Warrants and Notes (respectively), ignoring
any exercise limits set forth therein.
“Rule 144”
means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
SECURITIES PURCHASE AGREEMENT
“SEC Reports”
has the meaning ascribed to such term in Section 3.01(h).
“Securities”
means the Notes and the Warrants.
“Securities Act”
means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“State Securities
Laws” means the securities (or “blue sky”) rules, regulations, or other similar laws of a particular state.
“Subscription Amount”
means, as to each Investor, the aggregate amount to be paid for Securities purchased hereunder as specified below such Investor’s
name on the signature page of this Agreement and next to the heading “Aggregate Subscription Amount.”
“Subsidiary”
means any subsidiary of the Company as disclosed pursuant to Section 3.01(a) and shall, where applicable, include any direct or indirect
subsidiary of the Company formed or acquired after the date hereof.
“Trading Day”
means any day on which the principal Trading Market is open for trading or quoting.
“Trading Market”
means any of the following markets or exchanges on which the Common Shares are listed or quoted for trading on the date in question: the
NYSE American (or any successor thereto).
“Transaction Documents”
means this Agreement, the Notes, the Warrants, the Registration Rights Agreement, the Placement Agent Warrant, and all appendices, exhibits
and schedules hereto and thereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.
“Underlying Securities”
means the Warrant Shares and (if issued) the Conversion Shares.
“Warrants”
has the meaning provided in the recitals hereof.
“Warrant Shares”
means the Common Shares and/or other securities issuable upon the exercise of the Warrants.
ARTICLE II
PURCHASE AND SALE
Section 2.01. Closing.
On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery
of this Agreement by the parties hereto, the Company agrees to sell, and the Investors, severally and not jointly, agree to purchase the
Securities. At the Closing, the Investors shall deliver, via wire transfer, immediately available funds equal to the Investors’
aggregate Subscription Amounts to the Placement Agent’s counsel as set forth hereinbelow and the Company shall deliver to each Investor
its Securities. The Company and each Investor shall deliver the other items set forth in Section 2.01 deliverable at the Closing. Upon
satisfaction of the conditions set forth in Section 2.01 and Section 2.03, the Closing shall occur at the offices of Placement Agent’s
counsel, or such other location as the parties shall mutually agree or may be closed remotely by electronic delivery of documents.. The
Closing Date for any Securities shall be the date indicated on the applicable Investor signature pages attached hereto.
SECURITIES PURCHASE AGREEMENT
Section 2.02. Closing
Deliverables.
(a) By
Each Investor. On or prior to the Closing Date, each Investor shall deliver or cause to be delivered to the Company the following:
| (i) | this Agreement, including a fully completed Annex A attached
hereto, duly executed by such Investor; |
| (ii) | such Investor’s Subscription Amount by wire transfer to counsel
to the Placement Agent pursuant to the wiring instructions set forth in Section 2.03(c) below; |
| (iii) | a duly completed and signed Confidential Investor Questionnaire, a copy
of which is attached hereto as Appendix A; and |
| (iv) | the Registration Rights Agreement, the form of which is attached hereto
as Appendix D, duly executed by an authorized officer on behalf of the Investor. |
(b) By
the Company. On or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Investor the following:
| (i) | this Agreement, duly executed by an authorized officer of behalf of the
Company; |
| (ii) | a Note, the form of which is attached hereto as Appendix B,
registered in the name of such Investor (or its designee), with a principal amount equal to such Investor’s Original Principal Amount,
duly executed by an authorized officer of behalf of the Company; |
| (iii) | a Warrant instrument, the form of which is attached as Appendix
C, registered in the name of such Investor (or its designee) and duly executed by an authorized officer of behalf of the Company,
to initially purchase a number of Common Shares determined by dividing (A) the product of (i) such Investor’s Subscription Amount
and (ii) 50% by (B) the Initial Exercise Price under (and as defined in) the Warrants; |
| (iv) | the Registration Rights Agreement, the form of which is attached hereto
as Appendix D, duly executed by an authorized officer on behalf of the Company; |
| (v) | the Placement Agent Warrant, duly executed by an authorized officer on
behalf of the Company; and |
| (vi) | an officer’s certificate of the Company certifying the Company’s:
(a) certified certificate of formation; (b) good standing certificate in the State of Delaware; (c) operating agreement, bylaws and/or
any similar governing document(s); and (d) resolutions of its Board of Directors (or similar governing body) approving and authorizing
the execution, delivery and performance of the Transaction Documents and the transactions contemplated thereby. |
Section 2.03. Closing
Conditions.
(a) The
obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:
| (i) | the accuracy in all material respects on the Closing Date of each Investor’s
representations and warranties contained herein; |
| (ii) | all obligations, covenants and agreements of each Investor required to
be performed at or prior to the Closing Date shall have been performed; |
SECURITIES PURCHASE AGREEMENT
| (iii) | the existing warrants issued pursuant to the Security Purchase Agreement
dated August 11, 2023, shall have been reset; and |
| (iv) | the delivery by each Investor of the items set forth in Section 2.02(a)
of this Agreement. |
(b) The
respective obligations of the Investors hereunder in connection with the Closing are subject to the following conditions being met (it
being understood that the Company may waive any of the conditions for any Closing hereafter):
| (i) | the accuracy in all material respects (or, to the extent representations
or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the Closing Date of the representations
and warranties of the Company contained herein (unless as of a specific date therein in which case they shall be accurate as of such date); |
| (ii) | all obligations, covenants and agreements of the Company required to
be performed at or prior to the Closing Date shall have been performed; |
| (iii) | the delivery by the Company of the items set forth in Section 2.02(b)
of this Agreement; and |
| (iv) | there shall have been no Material Adverse Effect with respect to the
Company since the date hereof. |
(c) The
wiring instructions for counsel to the Placement Agent are as follows:
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations
and Warranties of the Company. The Company hereby represents and warrants to each Investor that, except as set forth on the Disclosure
Schedule to this Agreement delivered by the Company on or before the initial Closing Date (the “Disclosure Schedule”)
and/or SEC Reports, the following representations are true and complete as of the date of the date hereof. The Disclosure Schedule shall
be arranged in sections corresponding to the numbered and lettered sections contained in this Section 3.01, and the disclosures in any
section of the Disclosure Schedule shall qualify other sections in this Section 3.01 only to the extent it is readily apparent from a
reading of the disclosure that such disclosure is applicable to such other sections.
(a) Subsidiaries.
The Company does not have any Subsidiaries other than as set forth in the SEC Reports.
(b) Organization
and Qualification. The Company is an entity duly organized, validly existing and in good standing under the laws of the State of Delaware,
with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. The
Company is not in violation or default of any of the provisions of its certificate of formation and operating agreement, each, as amended
and in effect. A complete and correct copy of the Company’s certificate of formation and operating agreement, each as amended and
in effect on the date of this Agreement and as they will be in effect on the Closing Date, is attached to the officer’s certificate
referenced in Section 2.02(b)(vii). There are no other organizational or charter documents of the Company. Each Subsidiary is an entity
duly incorporated or otherwise organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or
organization, has the requisite power and authority to own and use its properties and assets and to carry on its business as currently
conducted. The Company and each Subsidiary is duly qualified to conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result
in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document; (ii) a material adverse effect
on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and its Subsidiaries, taken
as a whole, or any of its material assets or lines of business, individually; or (iii) a material adverse effect on the Company’s
ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing
or seeking to revoke, limit or curtail such power and authority or qualification.
SECURITIES PURCHASE AGREEMENT
(c) Authorization;
Enforcement. The Company has the requisite legal power and authority to enter into and to consummate the transactions contemplated
by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of
each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors
or the Company’s stockholders in connection therewith other than in connection with the Required Approvals. Each Transaction Document
to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with
the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance
with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights generally; (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable remedies; and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
(d) No
Conflicts. The execution, delivery and performance by the Company of the Transaction Documents to which it is a party, the issuance
and sale of the Securities and Placement Agent Warrant hereunder and the consummation by the Company of the other transactions contemplated
hereby and thereby do not and will not: (i) conflict with or violate any provision of the Company’s certificate of formation and
operating agreement, bylaws or other organizational or charter documents; (ii) conflict with, or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets
of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or
otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or
any Subsidiary is bound or affected; or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or any
Subsidiary is subject (including federal and State Securities Laws and regulations), or by which any property or asset of the Company
or any Subsidiary is bound or affected; except in the case of each of clause (ii), such as could not have or reasonably be expected to
result in a Material Adverse Effect.
(e) Filings,
Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to,
or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection
with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) such consents, waivers, or authorizations
as have been obtained before the Closing; (ii) the filing of Form D with the Commission and such filings as are required to be made under
applicable State Securities Laws; (iii) application(s) to each applicable Trading Market for the listing of the Underlying Securities
for trading thereon in the time and manner required thereby; and (iv) Equityholder Approval (collectively, the “Required Approvals”).
SECURITIES PURCHASE AGREEMENT
(f) Issuance
of the Securities. The Securities are (or, in the case of any Underlying Securities, will be upon issuance) duly authorized and, when
issued and/or paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable,
free and clear of all Liens other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved from
its duly authorized capital stock a number of Common Shares at least equal to the Required Minimum on the date hereof.
(g) Capitalization.
The capitalization of the Company is as set forth in Schedule 3.01(g). The Company has not issued any Common Shares, Common Shares Equivalents
or other membership interests since its most recently filed periodic report under the Exchange Act, other than Exempt Issuances, the issuance
of Common Shares or Common Shares Equivalents pursuant to agreements outstanding as of the date of the most recently filed periodic report
under the Exchange Act and pursuant to the conversion and/or exercise of Common Shares Equivalents outstanding as of the date of the most
recently filed periodic report under the Exchange Act. Except in instances where valid waivers have been obtained, no Person has any right
of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the
Transaction Documents. Except as set forth in the SEC Reports, there are no outstanding options, warrants, scrip rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or
exchangeable for, or giving any Person any right to subscribe for or acquire, any Common Shares or the capital stock of any Subsidiary,
or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional
Common Shares or Common Shares Equivalents or capital stock of any Subsidiary. The issuance and sale of the Securities and Placement Agent
Warrant will not obligate the Company or any Subsidiary to issue Common Shares or other securities to any Person (other than the Investors)
and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any
of such securities. There are no outstanding securities or instruments of the Company or any Subsidiary that contain any redemption or
similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is
or may become bound to redeem a security of the Company or such Subsidiary. The Company does not have any stock appreciation rights or
“phantom stock” plans or agreements or any similar plan or agreement. All of the outstanding shares of capital stock of the
Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities
laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase
securities. Except for the Required Approvals and waivers that have heretofore been obtained, no further approval or authorization of
any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities and Placement Agent Warrant.
There are no members agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which
the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.
(h) SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be
filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two
years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing
materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the
“SEC Reports”). As of their respective dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of
a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the
SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect
thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise
specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries
as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal year-end audit adjustments.
SECURITIES PURCHASE AGREEMENT
(i) Material
Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within
the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof: (a) there has been no event,
occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (b) the Company has
not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course
of business consistent with past practice, and (B) liabilities not required to be reflected in the Company’s financial statements
pursuant to GAAP or disclosed in filings made with the SEC, (c) the Company has not altered its method of accounting, (d) the Company
has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock, and (e) the Company has not issued any equity securities to any officer,
manager, director or Affiliate, except pursuant to existing Company equity incentive plans. The Company does not have pending before the
SEC any request for confidential treatment of information. Except for the issuance of the Securities contemplated by this Agreement, no
event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with
respect to the Company or its Subsidiaries or their respective businesses, prospects, properties, operations, assets or financial condition
that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed
made that has not been publicly disclosed at least one trading day prior to the date that this representation is made.
(j) Litigation.
There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened
against or affecting the Company or any Subsidiary, or any of their respective properties, before or by any court, arbitrator, governmental
or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”)
which: (A) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities;
or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. None of the
Company, any Subsidiary or any manager, director or officer thereof, is or has been the subject of any Action involving a claim of violation
of or liability under any of the following: (x) the Securities Act, the Exchange Act or any State Securities Laws; (y) breach of fiduciary
duty; or (z) fraud (statutory or common law), embezzlement, misappropriation or conversion of property or rights, or any other crime involving
deceit.
(k) Labor
Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company
or any Subsidiary which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or any Subsidiary’s
employees is a member of a union that relates to such employee’s relationship with the Company or any Subsidiary, and the Company
and its Subsidiaries are not a party to any collective bargaining agreement. The Company believes that its relationships with its employees
are good. No executive officer, to the knowledge of the Company, is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information agreement or non- competition agreement, or any other contract
or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does
not subject the Company or any Subsidiary to any liability with respect to any of the foregoing matters. To the best of the Company’s
knowledge, it and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance
could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(l) Compliance.
Except as disclosed in the SEC Reports, the Company and each Subsidiary: (i) is neither in default under nor in violation of (and no event
has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary
under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties
is bound (whether or not such default or violation has been waived); (ii) is not in violation of any order of any court, arbitrator or
governmental body; and (iii) is not and has not been in material violation of any statute, law, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect
the environment.
SECURITIES PURCHASE AGREEMENT
(m) Permits.
The Company and its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local
or foreign regulatory authorities necessary to conduct its business (“Permits”), and the Company and its Subsidiaries
have not received any notice of proceedings relating to the revocation or modification of any Permit.
(n) Title
to Assets. The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable
title in all personal property owned by it that, in each case, is material to the business of the Company and its Subsidiaries, in each
case free and clear of all Liens, except for (collectively, “Permitted Liens”) (i) Liens disclosed in the SEC Reports
that do not materially and adversely (x) affect the value of such property or (y) interfere with the use made and proposed to be made
of such property by the Company and its Subsidiaries and (ii) Liens for the payment of federal, state or other taxes, the payment
of which is neither delinquent nor subject to penalties in any material respect. Any real property and facilities held under lease by
the Company or a Subsidiary is held by it under valid, subsisting and enforceable leases with which the Company or such Subsidiary (as
applicable) are in compliance.
(o) Patents
and Trademarks. (i) The Company and its Subsidiaries has, or has rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar
rights as necessary or material for use in connection with its business and which the failure to so have could reasonably be expected
to have a Material Adverse Effect (collectively, the “Intellectual Property Rights”); (ii) the Company and its Subsidiaries
have not received a notice (written or otherwise) that any of the Intellectual Property Rights violates or infringes upon the intellectual
property rights of any other Person; (iii) all Intellectual Property Rights are enforceable by the Company or a Subsidiary, and there
is no existing infringement by any other Person of any of the Intellectual Property Rights, except where the failure to be so enforceable
or for such infringements as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and
(iv) the Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all
of its Intellectual Property Rights, except where failure to do so could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(p) Transactions
with Officers, Managers and Employees. None of the officers, managers or directors of the Company or its Subsidiaries and, to the
knowledge of the Company, none of the employees of the Company or its Subsidiaries, is presently a party to any transaction with the Company
(other than for services as employees, officers, managers and directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments
to or from, any such officer, manager, director or employee or, to the knowledge of the Company, any entity in which any such officer,
manager, director or employee has a substantial interest or is an officer, manager, director, trustee, member or partner, in each case
in excess other than for: (x) payment of salary or fees for services rendered; (y) reimbursement for expenses incurred on behalf of the
Company or a Subsidiary; and (z) other employee benefits, including stock option agreements under any stock option plan of the Company.
(q) Certain
Fees. Other than fees, commissions and expense reimbursement payable to the Placement Agent (which include: (i) a cash commission
of six percent (6%) of the proceeds raised in the Offering; (ii) the Placement Agent Warrant; (iii) a non-accountable and non-reimbursable
due diligence and expense fee of one percent (1%) of the proceeds raised in the Offering; and (iv) the other matters set forth in the
engagement letter between the Company and the Placement Agent dated June 22, 2023), no brokerage or finder’s fees or commissions
are or will be payable by the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the Offering or any of the transactions contemplated by the Transaction Documents. The Investors
shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type
contemplated in this Section 3.01(q) that may be due in connection with the Offering or any of the transactions contemplated by the Transaction
Documents.
SECURITIES PURCHASE AGREEMENT
(r) Private
Placement. Assuming the accuracy of the Investors’ representations and warranties set forth in Section 3.02, no registration
under the Securities Act is required for the offer and sale of the Securities by the Company to the Investors as contemplated hereby.
(s) Investment
Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities will not be or
be an Affiliate of, an ‘investment company’ within the meaning of the Investment Company Act of 1940, as amended. The Company
shall conduct its business in a manner so that it will not be an ‘investment company’ subject to registration under the Investment
Company Act of 1940, as amended.
(t) Registration
Rights. Except as set forth in Section 3.01(t) of the Disclosure Schedule and the Registration Rights Agreement, no Person has any
right to demand the Company to file a registration statement under the Securities Act covering the sale of any securities of the Company.
(u) Application
of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable
any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s certificate of incorporation or bylaws or the laws of its state of incorporation that
is or could become applicable to the Investors as a result of the Investors and the Company fulfilling their obligations or exercising
their rights under the Transaction Documents.
(v) Disclosure.
Except with respect to: (i) the material terms and conditions of the transactions contemplated by the Transaction Documents; and (ii)
information given to the Investors, if any, which the Company hereby confirms will not constitute material non-public information, the
Company confirms that neither it nor any other Person acting on its behalf has provided any of the Investors or their agents or counsel
with any information that it believes constitutes or might constitute material, nonpublic information. The Company understands and confirms
that the Investors will rely on the foregoing representation in effecting transactions in securities of the Company. All disclosure furnished
by or on behalf of the Company to the Investors regarding the Company, its business and the transactions contemplated hereby, is true
and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they were made, not misleading.
(w) No
Integrated Offering. Assuming the accuracy of the Investors’ representations and warranties set forth in Section 3.02, neither
the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales
of any security or solicited any offers to buy any security, under circumstances that would cause this Offering to be integrated with
prior offerings by the Company for purposes of the Securities Act which would require the registration of any such securities under the
Securities Act.
(x) Solvency.
Based on the consolidated financial condition of the Company as of the Closing Date after giving effect to the receipt by the Company
of the proceeds from the sale of the Securities hereunder: (i) the fair saleable value of the Company’s assets exceeds the amount
that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as
now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the
business conducted by the Company, and projected capital requirements and capital availability thereof; and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required
to be paid. The Company will not, after the Closing Date, incur debts beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in respect of its debt). Except as disclosed in the SEC Reports, the Company
has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the
bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date.
SECURITIES PURCHASE AGREEMENT
(y) Tax
Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material
Adverse Effect, the Company and its Subsidiaries have filed all federal, state and foreign income and franchise tax returns and have paid
or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been asserted or threatened
against the Company or any Subsidiary.
(z) No
General Solicitation. Neither the Company nor any Person acting on behalf of the Company has offered or sold any of the Securities
by any form of general solicitation or general advertising. The Company has offered the Securities for sale only to the Investors and
certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.
(aa) Insurance. The
Company and its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such
amounts as management of the Company reasonably believes to be prudent and customary in the businesses in which the Company and its Subsidiaries
are engaged. Neither the Company nor any of the Subsidiaries has been refused any insurance coverage sought or applied for, and the Company
has no reason to believe that it will not be able to renew all existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers.
(bb) Acknowledgment Regarding
Investors’ Purchase of Securities. The Company acknowledges and agrees that each of the Investors is acting solely in the capacity
of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further
acknowledges that no Investor is acting as a financial adviser or fiduciary of the Company (or in any similar capacity) with respect to
the Transaction Documents and the transactions contemplated thereby and any advice given by any Investor or any of their respective representatives
or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Investors’
purchase of the Securities. The Company further represents to each Investor that the Company’s decision to enter into this Agreement
and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
(cc) No Disqualification
Events. With respect to Securities to be offered and sold hereunder in reliance on Rule 506(b) under the Securities Act (“Regulation
D Securities”), none of the Company, any of its predecessors, any affiliated issuer, any director, manager, owner of twenty
percent (20%) or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter
(as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale (each, an
“Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of the ‘Bad
Actor’ disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”),
except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether
any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure
obligations under Rule 506(e), and has furnished to the Investors a copy of any disclosures provided thereunder.
SECURITIES PURCHASE AGREEMENT
(dd) Other Covered Persons.
The Company is not aware of any person (other than any Issuer Covered Person or the Placement Agent) that has been or will be paid (directly
or indirectly) remuneration for solicitation of purchasers in connection with the sale of any Regulation D Securities.
(ee) Notice of Disqualification
Events. The Company will notify the Investors in writing, prior to the Closing Date of: (i) any Disqualification Event relating to
any Issuer Covered Person; and (ii) any event that would, with the passage of time, become a Disqualification Event relating to any Issuer
Covered Person.
(ff) Foreign Corrupt Practices.
Neither the Company and its Subsidiaries, and to the knowledge of the Company, no agent or other person acting on behalf of the Company
or any Subsidiary, has: (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to foreign or domestic political activity; (ii) made any unlawful payment to foreign or domestic government officials
or employees or to any foreign or domestic political parties or campaigns from corporate funds; (iii) failed to disclose fully any contribution
made by the Company or any Subsidiary (or made by any person acting on its behalf of which the Company is aware) which is in violation
of law; or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act.
(gg) Office of Foreign
Assets Control. Neither the Company nor any Subsidiary nor, to the Company's knowledge, any director, manager, officer, agent, employee
or affiliate of the Company or any Subsidiary, is currently subject to any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department (“OFAC”).
(hh) U.S. Real Property
Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section
897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon an Investor’s request.
(ii) Bank
Holding Company Act. Neither the Company nor any of its Affiliates is subject to the Bank Holding Company Act of 1956, as amended
(“BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (“Federal Reserve”).
Neither the Company nor any of its Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares
of any class of voting securities or twenty- five percent (25%) or more of the total equity of a bank or any entity that is subject to
the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Affiliates exercises a controlling influence over
the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.
(jj) Money Laundering.
The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping
and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes
and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no Action or Proceeding
by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect
to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
(kk) Representations.
The representations and warranties of the Company contained in this Agreement, and the certificate(s) furnished or to be furnished to
the Investors at the Closing, when taken as a whole, do not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they
were made. The Company acknowledges and agrees that the representations contained in Section 3.02 shall not modify, amend or affect such
Investor’s right to rely on the Company’s representations and warranties contained in this Section 3.01 or elsewhere in this
Agreement or any representations and warranties contained in any other Transaction Document, or any other document or instrument executed
and/or delivered in connection with this Agreement or the consummation of the transactions contemplated hereby.
SECURITIES PURCHASE AGREEMENT
Section 3.02. Representations
and Warranties of the Investors. Each Investor, for itself and for no other Investor, hereby represents and warrants as of the date
hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein, in which case they shall be accurate
as of such date):
(a) Authority;
Organization. Such Investor has full power and authority (and, if such Investor is an individual, the capacity) to enter into this
Agreement and to perform all obligations required to be performed by it hereunder. If an entity, Such Investor is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its organization with full right, corporate or partnership
power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Investor
of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate or similar action on
the part of such Investor. Each Transaction Document to which it is a party has been duly executed by such Investor, and when delivered
by such Investor in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Investor, enforceable
against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited
by laws relating to the availability of specific performance, injunctive relief or other equitable remedies, and (iii) insofar as indemnification
and contribution provisions may be limited by applicable law.
(b) Own
Account. Such Investor understands that the Securities are “restricted securities” and have not been registered under
the Securities Act or any applicable State Securities Law and is acquiring the Securities as principal for its own account and not with
a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable State
Securities Law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable State
Securities Law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution
of such Securities (this representation and warranty not limiting such Investor’s right to sell the Securities in compliance with
applicable federal and State Securities Laws) in violation of the Securities Act or any applicable State Securities Law. Such Investor
is acquiring the Securities hereunder in the ordinary course of its business.
(c) Non-Transferrable.
Such Investor agrees: (i) that the Investor will not sell, assign, pledge, give, transfer or otherwise dispose of the Securities or any
interest therein, or make any offer or attempt to do any of the foregoing, except pursuant to a registration of the Securities under the
Securities Act and all applicable State Securities Laws, or in a transaction which is exempt from the registration provisions of the Securities
Act and all applicable State Securities Laws, (ii) that the certificates representing the Securities will bear a legend making reference
to the foregoing restrictions, and (iii) that the Company and its Affiliates shall not be required to give effect to any purported transfer
of such Securities except upon compliance with the foregoing restrictions.
(d) Investor
Status. Such Investor is an “accredited investor” as defined in Rule 501(a) under Regulation D of the Securities Act.
The undersigned agrees to furnish any additional information requested by the Company or any of its Affiliates to assure compliance with
applicable U.S. federal and state securities laws in connection with the purchase and sale of the Securities. The undersigned has completed
the Confidential Investor Questionnaire contained in Appendix A and the information contained therein is complete and accurate
as of the date thereof and is hereby affirmed as of the Closing Date. Any information that has been furnished or that will be furnished
by the undersigned to evidence its status as an accredited investor is accurate and complete, and does not contain any misrepresentation
or material omission.
(e) Experience
of Such Investor. Such Investor, either alone or together with its representatives, has such knowledge, sophistication, and experience
in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities,
and has so evaluated the merits and risks of such investment. Such Investor is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of such investment.
SECURITIES PURCHASE AGREEMENT
(f) No
Trading Market. Such Investor acknowledges that there is currently no active trading market for the Securities and that none is expected
to develop.
(g) General
Solicitation. Such Investor undersigned acknowledges that neither the Company nor any other person offered to sell the Securities
to it by means of any form of general solicitation or advertising, including, but not limited to: (i) any advertisement, article, notice,
or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or (ii) any seminar
or meeting whose attendees were invited by any general solicitation or general advertising.
(h) Confidentiality.
Other than to other Persons party to this Agreement and its advisors who have agreed to keep information confidential or have a fiduciary
obligation to keep such information confidential, such Investor has maintained the confidentiality of all disclosures made to it in connection
with the transaction (including the existence and terms of this transaction).
(i) Foreign
Investor. If such Investor is not a United States person, such Investor represents that it has satisfied itself as to the full observance
of the laws of its jurisdiction in connection with any invitation to subscribe for the Securities or any use of this Agreement, including:
(i) the legal requirements within its jurisdiction for the purchase of the Securities, (ii) any foreign exchange restrictions applicable
to such purchase, (iii) any governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences,
if any, that may be relevant to the purchase, holding, redemption, sale or transfer of the Securities. The Investor further represents
that its payment for, and its continued beneficial ownership of the Securities, will not violate any applicable securities or other laws
of its jurisdiction.
(j) Information
from Company. Such Investor and its investment managers, if any, have been afforded the opportunity to obtain any information necessary
to verify the accuracy of any representations or information presented by the Company in this Agreement and have had all inquiries to
the Company answered, and have been furnished all requested materials, relating to the Company and the Offering and sale of the Securities
and anything set forth in the Transaction Documents. Neither the Investor nor the Investor’s investment managers, if any, have been
furnished any offering literature by the Company or any of its Affiliates, associates, or agents other than the Transaction Documents,
and the agreements referenced therein.
(k) Speculative
Nature of Investment; Risk Factors. SUCH INVESTOR UNDERSTANDS THAT AN INVESTMENT IN THE SECURITIES INVOLVES A HIGH DEGREE OF RISK.
Such Investor acknowledges that: (i) any projections, forecasts or estimates as may have been provided to the Investor are purely speculative
and cannot be relied upon to indicate actual results that may be obtained through this investment; any such projections, forecasts and
estimates are based upon assumptions which are subject to change and which are beyond the control of the Company or its management, (ii)
the tax effects which may be expected by this investment are not susceptible to absolute prediction, and new developments and rules of
the Internal Revenue Service, audit adjustment, court decisions or legislative changes may have an adverse effect on one or more of the
tax consequences of this investment, and (iii) the Investor has been advised to consult with his own advisor regarding legal matters and
tax consequences involving this investment. The Investor represents that the Investor’s investment objective is speculative in that
the Investor seeks the maximum total return through an investment in a broad spectrum of securities, which involves a higher degree of
risk than other investment styles and therefore the Investor’s risk exposure is also speculative. The Securities offered hereby
are highly speculative and involve a high degree of risk and Investor should only purchase these securities if Investor can afford to
lose their entire investment.
(l) Money
Laundering. If an entity, the operations of such Investor are and have been conducted at all times in compliance with applicable financial
record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money
laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and
no Action or Proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company with
respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.
The Company acknowledges and
agrees that the representations contained in Section 3.02 shall not modify, amend or affect such Investor’s right to rely on the
Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other
Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation
of the transaction contemplated hereby.
SECURITIES PURCHASE AGREEMENT
ARTICLE IV
OTHER AGREEMENTS OF THE
PARTIES
Section 4.01. Transfer
Restrictions.
(a) The
Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or Rule 144, the Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities
under the Securities Act. The Securities may not be sold or transferred by the Investors without the written consent of the Company, which
shall not be unreasonably withheld. As a condition of such sale or transfer, any such transferee shall agree in writing to be bound by
the terms of this Agreement and shall have the rights of an Investor under this Agreement.
(b) The
Investors agree to the imprinting, so long as is required by this Section 4.01, of a legend on any of the Securities in the following
form:
[NEITHER] THIS SECURITY [NOR
THE SECURITIES FOR/INTO WHICH THIS SECURITY IS EXERCISABLE/CONVERTIBLE] HAS 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.
(c) Upon
the Investor’s request in connection with a proposed sale of Securities pursuant to Rule 144 and if the Company reasonably determines
it is so required, upon receipt of customary documentation from Investor’s broker (if the Securities are sold in brokers transactions),
the Company shall, at its own cost and effort, retain legal counsel to provide an opinion letter to the Company’s transfer agent
opining that the Securities may be resold without registration under the Securities Act, pursuant to Rule 144, promulgated thereunder,
so long as the requirements of Rule 144 are met for any Securities to be resold thereunder. The Company shall arrange for any such opinion
letter to be provided not later than two (2) Business Days after the date of delivery to and receipt by the Company of a written request
by any Investor together with (if required in order to render the opinion) any broker’s representation letter of other customary
documentation reasonably requested by the Company evidencing compliance with Rule 144 (the “Legend Removal Date”),
and such opinion letter may be a “blanket” opinion letter covering Securities held by more than one Investor (if applicable
to more than one Investor).
SECURITIES PURCHASE AGREEMENT
(d) Each
Investor, severally and not jointly with the other Investors, agrees that such Investor will sell any Securities only pursuant to either
the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom,
and that if Securities are sold pursuant to a registration statement, they will be sold in compliance with the plan of distribution set
forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this
Section 4.01 is predicated upon the Company’s reliance upon this understanding.
Section 4.02. Use of
Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder to: (a) cover the expenses related to the
Offering, and (b) for general working capital purposes and shall not use such proceeds: (i) for the satisfaction of any portion of the
Company’s debt (other than payment of trade payables in the ordinary course of the Company’s business and prior practices);
(ii) for the redemption of any Common Shares or Common Shares Equivalents; (iii) for the settlement of any outstanding litigation; (iv)
in violation of FCPA or OFAC regulations; or (v) to lend, give credit or make advances to any officers, managers, directors, employees
or Affiliates of the Company other than as stated in Section 4.02(b).
Section 4.03. Integration.
The Company shall not sell, offer for sale, or solicit offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act)that would be integrated with the offer or sale of the Securities to the Investors in a manner that would
require the registration under the Securities Act of the sale of the Securities to the Investors.
Section 4.04. Publicity.
The Company and each Investor shall consult with each other in issuing any other press releases with respect to the transactions contemplated
hereby, and neither the Company nor any Investor shall issue any such press release nor otherwise make any such public statement without
the prior consent of the Company with respect to any press release of any Investor, or without the prior consent of each Investor with
respect to any press release of the Company mentioning such Investor, which consent shall not unreasonably be withheld or delayed, except
if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of
such public statement or communication.
Section 4.05. Indemnification
of Investors. The Company shall indemnify, reimburse and hold harmless the Investors and their respective partners, members, stockholders,
officers, directors, managers, employees and agents (and any other persons with other titles that have similar functions) (collectively,
“Indemnitees”) from and against any and all losses, claims, liabilities, damages, penalties, suits, costs and expenses,
of any kind or nature, (including fees relating to the cost of investigating and defending any of the foregoing) imposed on, incurred
by or asserted against such Indemnitee in any way related to or arising from or alleged to arise from: (i) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents and (ii) any action instituted
against such Indemnitee in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an
Affiliate of such Indemnitee, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is
based upon a breach of such Indemnitee’s representations, warranties or covenants under the Transaction Documents or any agreements
or understandings such Indemnitee may have with any such stockholder or any violations by such Indemnitee of state or federal securities
laws or any conduct by such Indemnitee which results from the gross negligence or willful misconduct of the Indemnitee as determined by
a final, nonappealable decision of a court of competent jurisdiction).
Section 4.06. Reservation
of Shares.
(a) The
Company shall maintain a reserve from its duly authorized shares of Common Shares for issuance pursuant to the Securities, the Required
Minimum number of Common Shares.
(b) If,
on any date, the number of authorized but unissued (and otherwise unreserved) Common Shares is less than the Required Minimum on such
date, then the Board of Directors shall use commercially reasonable efforts to amend the Company’s certificate or articles of incorporation
to increase the number of authorized but unissued Common Shares to at least the Required Minimum at such time, as soon as possible and
in any event not later than the 60th day after such date.
SECURITIES PURCHASE AGREEMENT
Section 4.07. Equityholder
Approval; Prohibition on Issuance. In this Agreement “Equityholder Approval” means the approval of the holders
of a majority of the Company’s outstanding Common Shares to approve the issuance of all Common Shares underlying the Notes in excess
of 19.99% of the Company’s Common Shares (measured by number and voting power in accordance with Section 7.13 of the NYSE American
Company Guide) (the “Exchange Cap”, subject to appropriate adjustment for any stock dividend, stock split, stock combination,
rights offerings, reclassification or similar transaction that proportionately decreases or increases the number of outstanding Common
Shares). Further, the Investors hereby acknowledge and agree that: (A) the portion of the Exchange Cap allocated to the Investors for
the issuance of the Common Shares underlying the Notes shall be limited to 1,058,040 Common Shares (subject to appropriate adjustment
for any stock dividend, stock split, stock combination, rights offerings, reclassification or similar transaction that proportionately
decreases or increases the number of outstanding Common Shares) and (B) notwithstanding anything to the contrary set forth in the Notes,
in no event shall the Company issue Conversion Shares thereunder prior to the time that Equityholder Approval shall have been obtained.
The Company shall hold a special meeting of its members on or before the date that is ninety (90) calendar days after the date that an
Event of Default (as defined in the Notes) occurs for the purpose of obtaining Equityholder Approval, with the recommendation of the Company’s
Board of Directors that such proposal be approved, and the Company shall solicit proxies from its members in connection therewith in the
same manner as all other management proposals in such proxy statement and all management-appointed proxyholders shall vote their proxies
in favor of such proposal. In addition, all members of the Company’s Board of Directors and all of the Company’s executive
officers shall vote in favor of such proposal, for purposes of obtaining the Equityholder Approval, with respect to all Common Shares
of the Company then held by such Persons. The Company shall use its best efforts to obtain such Equityholder Approval. If the Company
does not obtain Equityholder Approval at the first meeting, the Company shall call a meeting as often as possible thereafter to seek Equityholder
Approval until the Equityholder Approval is obtained.
Section 4.08. Registration
Rights. The Company shall cause the Registration Rights Agreement to remain in full force and effect and the Company shall comply
in all material respects with the terms thereof, a copy of which is annexed hereto as Appendix D.
Section 4.09. Use of
Proceeds of Certain Asset Sales. If, at any time while the Notes are outstanding, the Company consummates any sale of a material amount
of assets of the Company or any of its Subsidiaries, the net proceeds thereof (or such lesser amount as may be required to satisfy and
pay-in-full all the Notes then outstanding (and not converted) shall be applied to the payment or prepayment of the Notes in accordance
with their terms.
ARTICLE V
MISCELLANEOUS
Section 5.01. Termination.
This Agreement may be terminated by any Investor, as to such Investor’s obligations hereunder only and without any effect whatsoever
on the obligations between the Company and the other Investors, by written notice to the other parties,; provided, however, that such
termination will not affect the right of any party to sue for any breach by the other party (or parties).
Section 5.02. Fees and
Expenses. Each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement except
as otherwise provided in Section 3.01(q).
SECURITIES PURCHASE AGREEMENT
Section 5.03. Entire
Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such
matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
Section 5.04. Notices.
Any notice, request, instruction or other document to be given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by or email:
if to an Investor or Investors:
To the address set forth on
such Investor’s signature page hereto;
with a copy to (which shall
not constitute notice):
if to the Company:
1847 Holdings LLC
590 Madison Avenue
21st Floor
New York, New York 10022
Attention: Ellery W. Roberts, Chief Executive Officer
with a copy to (which shall
not constitute notice):
Bevilacqua PLLC
1050 Connecticut Avenue, NW
Suite 500
Washington, DC 20036
Attn: Louis A. Bevilacqua,
Esq.
Email:
or to such other Persons or
addresses as may be designated in writing by the party to receive such notice as provided above.
Section 5.05. Amendments;
Waivers. No provision of this Agreement may be waived, modified, supplemented, or amended except in a written instrument signed, in
the case of an amendment, by the Company and the Investors holding at least a majority in principal amount of the Notes then outstanding
or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver
of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any
party to exercise any right hereunder in any manner impair the exercise of any such right.
Section 5.06. Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Investor (other
than by merger). Any Investor may assign any or all of its rights under this Agreement to any Person to whom such Investor assigns or
transfers any Securities, provided that such transfer complies with all applicable federal and State Securities Laws and that such transferee
agrees in writing with the Company to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents
that apply to the “Investors.”
SECURITIES PURCHASE AGREEMENT
Section 5.07. No Third-Party
Beneficiaries. This Agreement is intended for sole the benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
Section 5.08. Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed
by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflict
of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, managers, directors,
officers, stockholders, employees or agents) shall be commenced exclusively in the federal and state courts sitting in the County of New
York, New York (the “New York Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction
of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York
Courts, or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising
out of or relating to the Transaction Documents or the transactions contemplated hereby. If any party shall commence an action or proceeding
to enforce any provisions of the Transaction Documents, then the prevailing party in such action or proceeding shall be reimbursed by
the other party for its attorney’s fees and other costs and expenses incurred in the investigation, preparation and prosecution
of such action or proceeding.
Section 5.09. Survival.
The representations and warranties contained herein shall survive the Closing and the delivery of the Securities.
Section 5.10. Execution.
This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that
both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery
of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page was an original
thereof.
Section 5.11. Severability.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force
and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts
to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
Section 5.12. Rescission
and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of
the other Transaction Documents, whenever any Investor exercises a right, election, demand or option under a Transaction Document and
the Company does not timely perform its related obligations within the periods therein provided, then such Investor may rescind or withdraw,
in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights; provided, however, that in the case of a rescission of a conversion of a Note, the
Investor shall be required to return any Common Shares subject to any such rescinded conversion or exercise notice.
SECURITIES PURCHASE AGREEMENT
Section 5.13. Replacement
of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall
issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of
and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of
such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable
third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.
Section 5.14. Remedies.
In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Investors
and the Company will be entitled to seek specific performance under the Transaction Documents. The parties agree that monetary damages
may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and
hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law
would be adequate.
Section 5.15. Payment
Set Aside. To the extent that the Company makes a payment or payments to any Investor pursuant to any Transaction Document or an Investor
enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required
to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
Section 5.16. Independent
Nature of Investors’ Obligations and Rights. The obligations of each Investor under any Transaction Document are several and
not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance or non-performance
of the obligations of any other Investor under any Transaction Document. Nothing contained herein or in any other Transaction Document,
and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an association, a
joint venture, or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Investor shall be entitled to independently
protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction
Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose.
Each Investor has been represented by its own separate legal counsel in their review and negotiation of the Transaction Documents. The
Company has elected to provide all Investors with the same terms and Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by the Investors.
Section 5.17. Construction.
The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction Documents
and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of the Transaction Documents or any amendments hereto. In addition, each and every reference to
share prices and Common Shares in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock
dividends, stock combinations and other similar transactions of the Common Shares that occur after the date of this Agreement.
Section 5.18. Headings.
The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any
of the provisions hereof.
Section 5.19. WAIVER
OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY
WAIVES FOREVER TRIAL BY JURY.
[SIGNATURE PAGES FOLLOW]
SECURITIES PURCHASE AGREEMENT
IN WITNESS WHEREOF,
the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of
the date below.
| |
1847 HOLDINGS LLC |
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By: |
|
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Name: |
Ellery W. Roberts |
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Title: |
Chief Executive Officer |
| The Investors executing the Signature Page in the form attached
hereto as Annex A and delivering the same to the Company or its agents shall be deemed to have executed this Agreement
and agreed to the terms hereof. |
SECURITIES PURCHASE AGREEMENT
Annex A
Securities Purchase Agreement
Investor Counterpart Signature Page
The undersigned, desiring
to: (i) enter into this Securities Purchase Agreement dated as of May 8, 2024 (the “Agreement”), with the undersigned,
1847 Holdings LLC, a Delaware limited liability company (the “Company”), in or substantially in the form furnished
to the undersigned and (ii) purchase the Securities as set forth below, hereby agrees to purchase such Securities from the Company as
of the Closing and further agrees to join the Agreement as a party thereto, with all the rights and privileges appertaining thereto, and
to be bound in all respects by the terms and conditions thereof. The undersigned specifically acknowledges having read the representations
in this Agreement’s section entitled “Representations Warranties of the Investors”, and hereby represents that the statements
contained therein are complete and accurate with respect to the undersigned as an Investor.
| INVESTOR (if an individual): |
|
INVESTOR (if an entity): |
| |
|
|
| By: |
|
|
|
| Name: |
|
|
(Legal Name of Entity) |
| Date: |
|
By: |
|
| |
|
Name: |
|
| |
|
Title: |
|
| INVESTOR (if investing jointly): |
|
|
| |
|
Date: |
Date:
State/Country of Domicile or Formation: _______________________________________
Aggregate Subscription Amount: $____________________
SSN/EIN/ITIN:
____________________
Address:________________________________________________________________________________________
Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement
(this “Agreement”) is made and entered into as of May 8, 2024, between 1847 Holdings LLC, a Delaware limited liability
company (the “Company”), and each of the several Investors signatory hereto (hereinafter, each a “Purchaser”
and, collectively, the “Purchasers”).
This Agreement is made pursuant
to the Securities Purchase Agreement, dated as of May 8, 2024, between the Company and the Purchasers named therein (the “Purchase
Agreement”).
The Company and each Purchaser
hereby agrees as follows:
1. Definitions.
Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such
terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:
“Common
Shares” means the common shares of the Company, no par value.
“Effectiveness
Date” means, with respect to the Initial Registration Statement required to be filed hereunder: (i) the 90th calendar
day following the Filing Date hereof (or, in the event of a “full review” by the Commission, the 150th calendar
day following the Filing Date), and (ii) with respect to any additional Registration Statements which may be required pursuant to Section
2(c) or Section 3(c), the 30th calendar day following the date on which an additional Registration Statement is required
to be filed hereunder (or, in the event of a “full review” by the Commission, the 60th calendar day following
the date hereof); provided, however, that in the event the Company is notified by the Commission that one or more of
the above Registration Statements will not be reviewed or is no longer subject to further review and comments, the Effectiveness Date
as to such Registration Statement shall be the fifth Trading Day following the date on which the Company is so notified if such date precedes
the dates otherwise required above, provided, further, if such Effectiveness Date falls on a day that is not a Trading Day, then the Effectiveness
Date shall be the next succeeding Trading Day.
“Filing
Date” means, with respect to the Initial Registration Statement required hereunder, May 31, 2024, and with respect to any additional
Registration Statements which may be required pursuant to Section 2(c) or Section 3(c), the earliest practical date on which the Company
is permitted by SEC Guidance to file such additional Registration Statement related to the Registrable Securities.
“Holder”
or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities.
“Initial
Registration Statement” means the initial Registration Statement filed pursuant to this Agreement.
“Prospectus”
means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated by the Commission
pursuant to the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of
any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.
“Registrable
Securities” means, as of any date of determination, (a) the Warrant Shares, (b) 1,301,115 Conversion Shares and (b) any securities
issued or then issuable upon any share split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided,
however, that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain
the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) for so long as (i) a Registration Statement
with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act and such Registrable
Securities have been disposed of by the Holder in accordance with such effective Registration Statement, (ii) such Registrable Securities
have been previously sold in accordance with Rule 144, or (iii) such securities become eligible for resale without volume or manner-of-sale
restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed,
delivered and acceptable to the Transfer Agent and the affected Holders (assuming that such securities and any securities issuable upon
exercise, conversion or exchange of which, or as a dividend upon which, such securities were issued or are issuable, were at no time held
by any Affiliate of the Company, as reasonably determined by the Company, upon the advice of counsel to the Company.
“Registration
Statement” means any registration statement required to be filed hereunder pursuant to Section 2(a) and any additional registration
statements contemplated by Section 2(c) or Section 3(c), including (in each case) the Prospectus, amendments and supplements to any such
registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in any such registration statement.
“Rule 415”
means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time,
or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 424”
means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time,
or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“SEC Guidance”
means (i) any publicly-available written or oral guidance of the Commission staff, or any comments, requirements or requests of the Commission
staff and (ii) the Securities Act.
2. Shelf
Registration.
(a) On
or prior to each Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all
of the Registrable Securities that are not then registered on an effective Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415. Each Registration Statement filed hereunder shall be on Form S-3 (except if the Company is not then eligible
to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in
accordance herewith, subject to the provisions of Section 2(e)) and shall contain substantially the “Plan of Distribution”
attached hereto as Annex A; provided, however, that no Holder shall be required to be named as an
“underwriter” without such Holder’s express prior written consent. Subject to the terms of this Agreement, the Company
shall use its best efforts to cause a Registration Statement filed under this Agreement (including, without limitation, under Section
3(c)) to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than
the applicable Effectiveness Date, and shall use its best efforts to keep such Registration Statement continuously effective under the
Securities Act until the date that all Registrable Securities covered by such Registration Statement (i) have been sold, thereunder or
pursuant to Rule 144, or (ii) may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement
for the Company to be in compliance with the current public information requirement under Rule 144, as determined by the counsel to the
Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the affected Holders (the
“Effectiveness Period”). The Company shall telephonically request effectiveness of a Registration Statement as of 5:00
p.m. (New York City time) on a Trading Day. The Company shall immediately notify the Holders via facsimile or by e-mail of the effectiveness
of a Registration Statement on the same Trading Day that the Company telephonically confirms effectiveness with the Commission, which
shall be the date requested for effectiveness of such Registration Statement. The Company shall, by 9:30 a.m. (New York City time) on
the Trading Day after the effective date of such Registration Statement, file a final Prospectus with the Commission as required by Rule 424.
Failure to so notify the Holder within one (1) Trading Day of such notification of effectiveness or failure to file a final Prospectus
as foresaid shall be deemed an Event under Section 2(d).
(b) Notwithstanding
the registration obligations set forth in Section 2(a), if the Commission informs the Company that all of the Registrable Securities
cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement,
the Company agrees to promptly inform each of the Holders thereof and use its commercially reasonable efforts to file amendments to the
Initial Registration Statement as required by the Commission, covering the maximum number of Registrable Securities permitted to be registered
by the Commission, on Form S-3 or such other form available to register for resale the Registrable Securities as a secondary offering,
subject to the provisions of Section 2(e); with respect to filing on Form S-3 or other appropriate form, and subject to the provisions
of Section 2(d) with respect to the payment of liquidated damages; provided, however, that prior to filing such
amendment, the Company shall be obligated to use diligent efforts to advocate with the Commission for the registration of all of the Registrable
Securities in accordance with the SEC Guidance, including without limitation, Compliance and Disclosure Interpretation 612.09.
(c) Notwithstanding
any other provision of this Agreement and subject to the payment of liquidated damages pursuant to Section 2(d), if the Commission or
any SEC Guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular Registration
Statement as a secondary offering (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the
registration of all or a greater portion of Registrable Securities), unless otherwise directed in writing by a Holder as to its Registrable
Securities, the number of Registrable Securities to be registered on such Registration Statement will be reduced as follows:
(i) First,
the Company shall reduce or eliminate any securities to be included other than Registrable Securities;
(ii) Second,
the Company shall reduce Registrable Securities represented by Warrant Shares (applied, in the case that some Warrant Shares may be registered,
to the Holders on a pro rata basis based on the total number of unregistered Warrant Shares held by such Holders); and
(iii) Third,
the Company shall reduce Registrable Securities represented by Shares (applied, in the case that some Shares may be registered, to the
Holders on a pro rata basis based on the total number of unregistered Shares held by such Holders).
In the event of a cutback hereunder,
the Company shall give the Holder at least five (5) Trading Days prior written notice along with the calculations as to such Holder’s
allotment. In the event the Company amends the Initial Registration Statement in accordance with the foregoing, the Company will use its
best efforts to file with the Commission, as promptly as allowed by Commission or SEC Guidance provided to the Company or to registrants
of securities in general, one or more registration statements on Form S-3 or such other form available to register for resale those Registrable
Securities that were not registered for resale on the Initial Registration Statement, as amended.
(d) If:
(i) the Initial Registration Statement is not filed on or prior to its Filing Date (if the Company files the Initial Registration Statement
without affording the Holders the opportunity to review and comment on the same as required by Section 2(a) herein, the Company shall
be deemed to have not satisfied this clause (i)), or (ii) the Company fails to file with the Commission a request for acceleration of
a Registration Statement in accordance with Rule 461 promulgated by the Commission pursuant to the Securities Act, within five (5) Trading
Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that such Registration Statement
will not be “reviewed” or will not be subject to further review, or (iii) prior to the effective date of a Registration Statement,
the Company fails to file a pre-effective amendment and otherwise respond in writing to comments made by the Commission in respect of
such Registration Statement within five (5) calendar days after the receipt of comments by or notice from the Commission that such amendment
is required in order for such Registration Statement to be declared effective, or (iv) a Registration Statement registering for resale
all of the Registrable Securities, subject to the cutback limitations set forth in Section 2(c) of this Agreement, is not declared effective
by the Commission by the Effectiveness Date of the Initial Registration Statement, or (v) after the effective date of a Registration Statement,
such Registration Statement ceases for any reason to remain continuously effective as to all Registrable Securities included in such Registration
Statement, or the Holders are otherwise not permitted to utilize the Prospectus therein to resell such Registrable Securities, for more
than five (5) consecutive calendar days or more than an aggregate of ten (10) calendar days (which need not be consecutive calendar days)
during any 12-month period (any such failure or breach being referred to as an “Event”, and for purposes of clauses
(i) and (iv), the date on which such Event occurs, and for purpose of clause (ii) the date on which such five (5) Trading Day period is
exceeded, and for purpose of clause (iii) the date which such five (5) calendar day period is exceeded, and for purpose of clause (v)
the date on which such five (5) or ten (10) calendar day period, as applicable, is exceeded being referred to as “Event Date”),
then, in addition to any other rights the Holders may have hereunder or under applicable law, on each such Event Date and on each monthly
anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured,
the Company shall pay to each Holder an amount in cash, as partial liquidated damages and not as a penalty, equal to the product of 1.0%
multiplied by the aggregate Subscription Amount paid by such Holder pursuant to the Purchase Agreement, subject to an aggregate cap of
10%. If the Company fails to pay any partial liquidated damages pursuant to this Section 2(d) in full within seven days after the date
payable, the Company will pay interest thereon at a rate of 18% per annum (or such lesser maximum amount that is permitted to be paid
by applicable law) to the Holder, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full. The partial liquidated damages pursuant to the terms hereof shall apply on a daily pro rata basis
for any portion of a month prior to the cure of an Event. The Company shall not accrue any liquidated damages under this Section 2(d)
beyond the 366th day from the date of this Agreement, provided that amounts that have accrued and interest
due thereon will continue to accrue until paid in full.
(e) If
Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale
of the Registrable Securities on another appropriate form and (ii) undertake to register the Registrable Securities on Form S-3 as soon
as such form is available, provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until
such time as a Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the Commission.
(f) Notwithstanding
anything to the contrary contained herein, in no event shall the Company be permitted to name any Holder or affiliate of a Holder as any
Underwriter without the prior written consent of such Holder.
3. Registration
Procedures. In connection with the Company’s registration obligations hereunder, the Company shall:
(a) Not
less than five (5) Trading Days prior to the filing of each Registration Statement and not less than one (1) Trading Day prior to the
filing of any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to
be incorporated therein by reference), the Company shall (i) furnish to each Holder copies of all such documents proposed to be filed,
which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of such Holders,
and (ii) cause its officers and directors, counsel and independent registered public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel to each Holder, to conduct a reasonable investigation within the meaning
of the Securities Act. The Company shall not file a Registration Statement or any such Prospectus or any amendments or supplements thereto
to which the Holders of a majority of the Registrable Securities shall reasonably object in good faith, provided that, the Company is
notified of such objection in writing no later than five (5) Trading Days after the Holders have been so furnished copies of a Registration
Statement or one (1) Trading Day after the Holders have been so furnished copies of any related Prospectus or amendments or supplements
thereto. Each Holder agrees to furnish to the Company a completed questionnaire in the form attached to this Agreement as Annex
B (a “Selling Shareholder Questionnaire”) on a date that is not less than two (2) Trading Days prior to the
Filing Date or by the end of the fourth (4th) Trading Day following the date on which such Holder receives draft materials
in accordance with this Section 3(a).
(b) (i)
Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register
for resale under the Securities Act all of the Registrable Securities, (ii) cause the related Prospectus to be amended or supplemented
by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant
to Rule 424, (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration
Statement or any amendment thereto and provide as promptly as reasonably possible to the Holders true and complete copies of all correspondence
from and to the Commission relating to a Registration Statement (provided that, the Company shall excise any information contained therein
which would constitute material non-public information regarding the Company or any of its Subsidiaries), and (iv) comply in all material
respects with the applicable provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable
Securities covered by a Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with
the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus
as so supplemented.
(c) If
during the Effectiveness Period, the number of Registrable Securities at any time exceeds 100% of the number of Common Shares then registered
in a Registration Statement, then the Company shall file as soon as reasonably practicable, but in any case prior to the applicable Filing
Date, an additional Registration Statement covering the resale by the Holders of not less than the number of such Registrable Securities.
(d) Notify
the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied by
an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (and,
in the case of (i)(A) below, not less than one (1) Trading Day prior to such filing) and (if requested by any such Person) confirm such
notice in writing no later than one (1) Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to a Registration Statement is proposed to be filed, (B) when the Commission notifies the Company whether there will be a “review”
of such Registration Statement and whenever the Commission comments in writing on such Registration Statement, and (C) with respect to
a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or
any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional
information, (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending
the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for
that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding
for such purpose, (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration
Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement,
Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain
any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading, and (vi) of the occurrence or existence of any pending
corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company,
makes it not in the best interest of the Company to allow continued availability of a Registration Statement or Prospectus; provided, however,
that in no event shall any such notice contain any information which would constitute material, non-public information regarding the Company
or any of its Subsidiaries.
(e) Use
its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending the effectiveness
of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities
for sale in any jurisdiction, at the earliest practicable moment.
(f) Furnish
to each Holder, without charge, at least one conformed copy of each such Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference to the extent requested
by such Person, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission, provided that any such item which is available on the EDGAR system (or
successor thereto) need not be furnished in physical form.
(g) Subject
to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by
each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any
amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(d).
(h) Prior
to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with
the selling Holders in connection with the registration or qualification (or exemption from the Registration or qualification) of such
Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States
as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of
the Registrable Securities covered by each Registration Statement, provided that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction
where it is not then so subject or file a general consent to service of process in any such jurisdiction.
(i) If
requested by a Holder, cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable
Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted
by the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered
in such names as any such Holder may request.
(j) Upon
the occurrence of any event contemplated by Section 3(d), as promptly as reasonably possible under the circumstances taking into account
the Company’s good faith assessment of any adverse consequences to the Company and its shareholders of the premature disclosure
of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to
the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document
so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. If the Company notifies the Holders in accordance with clauses (iii) through (vi) of Section
3(d) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall
suspend use of such Prospectus. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly
as is practicable. The Company shall be entitled to exercise its right under this Section 3(j) to suspend the availability of a Registration
Statement and Prospectus, subject to the payment of partial liquidated damages otherwise required pursuant to Section 2(d), for a period
not to exceed 60 calendar days (which need not be consecutive days) in any 12-month period.
(k) Otherwise
use commercially reasonable efforts to comply with all applicable rules and regulations of the Commission under the Securities Act and
the Exchange Act, including, without limitation, Rule 172 under the Securities Act, file any final Prospectus, including any supplement
or amendment thereof, with the Commission pursuant to Rule 424 under the Securities Act, promptly inform the Holders in writing if, at
any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof,
the Holders are required to deliver a Prospectus in connection with any disposition of Registrable Securities and take such other actions
as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder.
(l) The
Company may require each selling Holder to furnish to the Company a certified statement as to the number of Common Shares beneficially
owned by such Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over the
shares. During any periods that the Company is unable to meet its obligations hereunder with respect to the registration of the Registrable
Securities solely because any Holder fails to furnish such information within three (3) Trading Days of the Company’s request, any
liquidated damages that are accruing at such time as to such Holder only shall be tolled and any Event that may otherwise occur solely
because of such delay shall be suspended as to such Holder only, until such information is delivered to the Company.
4. Registration
Expenses. All fees and expenses incident to the performance of or compliance with, this Agreement by the Company shall be borne by
the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to
in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees
and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the Commission,
(B) with respect to filings required to be made with any Trading Market on which the Common Shares are then listed for trading, and (C)
in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation,
fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities),
(ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance,
if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal
expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the
fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder.
In no event shall the Company be responsible for any broker or similar commissions of any Holder or, except to the extent provided for
in the Transaction Documents, any legal fees or other costs of the Holders.
5. Indemnification.
(a) Indemnification
by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, members, partners, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a
result of a pledge or any failure to perform under a margin call), investment advisors and employees (and any other Persons with a functionally
equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each Person
who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, members, shareholders, partners, agents and employees (and any other Persons with a functionally equivalent role of a Person
holding such titles, notwithstanding a lack of such title or any other title) of each such controlling Person, to the fullest extent permitted
by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable
attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) any untrue
or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement
thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance
of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are
based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to
the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities
and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement, such Prospectus or in
any amendment or supplement thereto (it being understood that the Holder has approved Annex A hereto for this purpose) or (ii) in the
case of an occurrence of an event of the type specified in Section 3(d)(iii)-(vi), the use by such Holder of an outdated, defective or
otherwise unavailable Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated, defective or otherwise
unavailable for use by such Holder and prior to the receipt by such Holder of the Advice contemplated in Section 6(c). The Company shall
notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions
contemplated by this Agreement of which the Company is aware. Such indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such indemnified person and shall survive the transfer of any Registrable Securities by any of the Holders in
accordance with Section 6(f).
(b) Indemnification
by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents
and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law,
from and against all Losses, as incurred, to the extent arising out of or based solely upon: any untrue or alleged untrue statement of
a material fact contained in any Registration Statement, any Prospectus, or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary
to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were
made) not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information
so furnished in writing by such Holder to the Company expressly for inclusion in such Registration Statement or such Prospectus or (ii)
to the extent, but only to the extent, that such information relates to such Holder’s information provided in the Selling Shareholder
Questionnaire or the proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such
Holder expressly for use in a Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose),
such Prospectus or in any amendment or supplement thereto. In no event shall the liability of a selling Holder be greater in amount than
the dollar amount of the proceeds (net of all expenses paid by such Holder in connection with any claim relating to this Section 5 and
the amount of any damages such Holder has otherwise been required to pay by reason of such untrue statement or omission) received by such
Holder upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation.
(c) Conduct
of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder
(an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the
“Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection
with defense thereof, provided that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party
of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a
court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have materially
and adversely prejudiced the Indemnifying Party. An Indemnified Party shall have the right to employ separate counsel in any such Proceeding
and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses, (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any
such Proceeding, or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party
notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel
shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably withheld or delayed. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified
Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that
are the subject matter of such Proceeding. Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified
Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding
in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of written
notice thereof to the Indemnifying Party, provided that the Indemnified Party shall promptly reimburse the Indemnifying Party for that
portion of such fees and expenses applicable to such actions for which such Indemnified Party is finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review) not to be entitled to indemnification hereunder.
(d) Contribution.
If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party
harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by,
or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party
as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’
or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified
for such fees or expenses if the indemnification provided for in this Section 5(d) was available to such party in accordance with its
terms. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined
by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in
the immediately preceding paragraph. In no event shall the contribution obligation of a Holder of Registrable Securities be greater in
amount than the dollar amount of the proceeds (net of all expenses paid by such Holder in connection with any claim relating to this Section
5 and the amount of any damages such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission) received by it upon the sale of the Registrable Securities giving rise to such contribution obligation.
The indemnity and contribution agreements contained in this Section 5(d) are in addition to any liability that the Indemnifying Parties
may have to the Indemnified Parties.
6. Miscellaneous.
(a) Remedies.
In the event of a breach by the Company or by a Holder of any of their respective obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery
of damages, shall be entitled to specific performance of its rights under this Agreement. Each of the Company and each Holder agrees that
monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions
of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall
not assert or shall waive the defense that a remedy at law would be adequate.
(b) No
Piggyback on Registrations; Prohibition on Filing Other Registration Statements. Except for the securities listed on Schedule 6(g),
neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of
the Company in any Registration Statements other than the Registrable Securities. The Company shall not file any other registration statements
until all Registrable Securities are registered pursuant to a Registration Statement that is declared effective by the Commission, provided
that this Section 6(b) shall not prohibit the Company from filing amendments to registration statements filed prior to the date of this
Agreement so long as no new securities are registered on any such existing registration statements.
(c) Discontinued
Disposition. By its acquisition of Registrable Securities, each Holder agrees that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in Section 3(d)(iii) through (vi), such Holder will forthwith discontinue disposition of
such Registrable Securities under a Registration Statement until it is advised in writing (the “Advice”) by the Company
that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed. The Company will use its best
efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company agrees and acknowledges that
any periods during which the Holder is required to discontinue the disposition of the Registrable Securities hereunder shall be subject
to the provisions of Section 2(d).
(d) Amendments
and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the
Company and the Holders of 50.1% or more of the then outstanding Registrable Securities (for purposes of clarification, this includes
any Registrable Securities issuable upon exercise or conversion of any Security), provided that, if any amendment, modification or waiver
disproportionately and adversely impacts a Holder (or group of Holders), the consent of such disproportionately impacted Holder (or group
of Holders) shall be required. If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or
amendment done in compliance with the previous sentence, then the number of Registrable Securities to be registered for each Holder shall
be reduced pro rata among all Holders and each Holder shall have the right to designate which of its Registrable Securities shall be omitted
from such Registration Statement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of a Holder or some Holders and that does not directly or indirectly affect the rights
of other Holders may be given only by such Holder or Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however,
that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the first
sentence of this Section 6(c). No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification
of any provision of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.
(e) Notices.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth
in the Purchase Agreement.
(f) Successors
and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. The Company may not assign (except by merger) its rights or obligations hereunder
without the prior written consent of all of the Holders of the then outstanding Registrable Securities. Each Holder may assign their respective
rights hereunder in the manner and to the Persons as permitted under Section 5.07 of the Purchase Agreement.
(g) No
Inconsistent Agreements. Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company
or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would
have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Except
as set forth on Schedule 6(g), neither the Company nor any of its Subsidiaries has previously entered into any agreement granting
any registration rights with respect to any of its securities to any Person that have not been satisfied in full.
(h) Execution
and Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered
one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party,
it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature
page were an original thereof.
(i) Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be determined in
accordance with the provisions of the Purchase Agreement.
(j) Cumulative
Remedies. The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.
(k) Severability.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force
and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts
to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
(l) Headings.
The headings in this Agreement are for convenience only, do not constitute a part of the Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
(m) Independent
Nature of Holders’ Obligations and Rights. The obligations of each Holder hereunder are several and not joint with the obligations
of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder
hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder
pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind
of group or entity, or create a presumption that the Holders are in any way acting in concert or as a group or entity with respect to
such obligations or the transactions contemplated by this Agreement or any other matters, and the Company acknowledges that the Holders
are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or transactions.
Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement,
and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose. The use of
a single agreement with respect to the obligations of the Company contained was solely in the control of the Company, not the action or
decision of any Holder, and was done solely for the convenience of the Company and not because it was required or requested to do so by
any Holder. It is expressly understood and agreed that each provision contained in this Agreement is between the Company and a Holder,
solely, and not between the Company and the Holders collectively and not between and among Holders.
********************
(Signature Pages Follow)
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
| |
1847 HOLDINGS LLC |
| |
|
| |
By: |
|
| |
Name: |
Ellery W. Roberts |
| |
Title: |
Chief Executive Officer |
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
[SIGNATURE
PAGE OF PURCHASERS]
Name of Purchaser: __________________________
Signature of Authorized Signatory of Purchaser:
__________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________
14
Exhibit 10.3
NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE 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. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION
OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
| Original Issue Date: May 8, 2024 |
|
Subscription Amount: |
|
$ |
500,000 |
| Date of this Note: May 8, 2024 |
|
Original Issue Discount: |
|
$ |
125,000 |
| Maturity Date: August 8, 2024 |
|
Original Principal Amount: |
|
$ |
625,000 |
1847
HOLDINGS LLC
20%
OID SUBORDINATED NOTE
THIS
20% OID SUBORDINATED NOTE is one of a series of duly authorized and validly issued promissory notes of 1847 Holdings LLC, a Delaware
limited liability company (the “Company”), designated as its 20% original issue discount subordinated promissory notes
(this “Note” and, collectively with the other such notes of such series, the “Notes”).
FOR
VALUE RECEIVED, the Company promises to pay to [ ] or its registered assigns (“Holder”) the principal sum of $625,000
(the “Original Principal Amount”) on the Maturity Date specified above (the “Maturity Date”) or
such earlier date as this Note is required or permitted to be repaid as provided hereunder. This Note is subject to the following additional
provisions:
Section
1. Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Note: (a) capitalized terms not
otherwise defined herein shall have the meanings set forth in the Purchase Agreement, and (b) the following terms shall have the following
meanings:
“Alternate
Consideration” shall have the meaning set forth in Section 5(j).
“Bankruptcy
Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w)
of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant
Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that
is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or
bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary
thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or
stayed within 60 calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment
for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging
a composition, adjustment or restructuring of its debts, (g) the Company or any Significant Subsidiary thereof admits in writing that
it is generally unable to pay its debts as they become due, (h) the Company or any Significant Subsidiary thereof, by any act or failure
to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action
for the purpose of effecting any of the foregoing.
“Beneficial
Ownership Limitation” shall have the meaning set forth in Section 4(c)
“Business
Day” means any day except Saturday, Sunday, any day which is a federal legal holiday in the United States or any day on which
banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“Change
of Control Transaction” means the occurrence after the date hereof of any of: (a) an acquisition after the date hereof by an
individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective
control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 50%
of the voting securities of the Company (other than by means of conversion of the Notes), (b) the Company merges into or consolidates
with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders
of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the Company or the successor
entity of such transaction, (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders
of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately
after the transaction, (d) a replacement at one time or within a three year period of more than one-half of the members of the Board
of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue
Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors
was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by the
Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth in clauses
(a) through (d) above.
“Conversion”
means a conversion of this Note pursuant to Section 4.
“Conversion
Amount” shall have the meaning set forth in Section 4.
“Conversion
Date” means the date of any Conversion following the occurrence of any Event of Default in accordance with the terms of this
Note.
“Conversion
Discount” means 10%.
“Conversion
Price” means, on any day, the product of: (i) 100% less the Conversion Discount, and (ii) the VWAP as of such
day.
“Conversion
Shares” With respect to any Conversion of this Note (in whole or in part), a number of Common Shares equal to the quotient
(rounded down to the nearest whole share) obtained by dividing (x) the Conversion Amount of such Conversion by (y) the Conversion Price
then in effect.
“Default
Amount” means the sum of: (i) the product of (x) the outstanding balance of the Original Principal Amount of this Note and
(y) 140%, plus (ii) all other amounts, costs, expenses, and liquidated damages due under or in respect of this Note, if any.
“Event
of Default” shall have the meaning set forth in Section 7(a).
“Fundamental
Transaction” shall have the meaning set forth in Section 5(j).
“Indebtedness”
means any liabilities of the Company for borrowed money or amounts owed and all guaranties made by the Company of borrowed money or amounts
owed by others.
“Lien”
means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest
in, on or of such asset, and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention
agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset.
“New
York Courts” shall have the meaning set forth in Section 8(e).
“Note
Register” shall have the meaning set forth in Section 2.
“Original
Issue Date” means the date of the first issuance of the Notes, regardless of any transfers of any Note and regardless of the
number of instruments which may be issued to evidence such Notes.
“Payment
Amount” means the sum of: (i) the outstanding balance of the Original Principal Amount of this Note plus (ii) all other
amounts, costs, expenses, and liquidated damages due under or in respect of this Note, if any.
“Permitted
Indebtedness” means: (a) the Indebtedness evidenced by the Notes, (b) the Senior Indebtedness and all other indebtedness of
the Company outstanding on the Original Issue Date or (c) other Indebtedness that is fully subordinated to the Indebtedness evidenced
by the Notes pursuant to a subordination or intercreditor agreement reasonably satisfactory to the Placement Agent.
“Permitted
Lien” means (i) Liens existing on the date hereof or to be incurred securing Permitted Indebtedness, (ii) statutory liens of
landlords and liens of carriers, warehousemen, bailees, mechanics, materialmen and other like liens imposed by law, created in the ordinary
course of business and securing amounts not yet due (or which are being contested in good faith, by appropriate proceedings or other
appropriate actions which are sufficient to prevent imminent foreclosure of such liens), (iii) deposits made (and the liens thereon)
in the ordinary course of business of the Company (including, without limitation, security deposits for leases, indemnity bonds, surety
bonds and appeal bonds) in connection with workers’ compensation, unemployment insurance and other types of social security benefits
or to secure the performance of tenders, bids, contracts (other than for the repayment or guarantee of borrowed money or purchase money
obligations), statutory obligations and other similar obligations arising as a result of progress payments under government contracts,
(iv) Liens for taxes not yet due and payable or which are being contested in good faith, and (v) purchase money Liens relating to the
acquisition of equipment, machinery or other goods of the Company.
“Purchase
Agreement” means the Securities Purchase Agreement, dated as of May 8, 2024 by and among the Company and the original Holders,
as amended, modified, or supplemented from time to time in accordance with its terms.
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Share
Delivery Date” shall have the meaning set forth in Section 4(b)(ii).
“Successor
Entity” shall have the meaning set forth in Section 5(j).
“Trading
Day” means any day on which the principal Trading Market is open for trading or quoting.
“Trading
Market” means any of the following markets or exchanges on which the Common Shares are listed or quoted for trading on the
date in question, the NYSE American (or any successor thereto).
“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Shares are then listed
or quoted on a Trading Market, the lowest of the closing sale prices of the Common Shares on the five (5) Trading Days immediately prior
to such date (or the nearest preceding date) on the Trading Market on which the Common Shares are 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)) (or a similar organization
or agency succeeding to its functions of reporting prices), (b) if the Common Shares are not then listed or quoted for trading on a Trading
Market, the lowest of the closing sale prices of the Common Shares on the five (5) Trading Days immediately prior to such date (or the
nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Shares are not then listed or quoted for trading on a Trading
Market, OTCQB or OTCQX and if prices for the Common Shares 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 Shares so reported, or (d) in all other cases, the fair market value of a share of Common Shares as determined by an independent
appraiser selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid
by the Company.
Section
2. Payment and Prepayment. On the Maturity Date the entire unpaid Payment Amount (or, if an Event of Default shall have previously
occurred, the entire Default Amount) shall become due and payable. The Company may prepay this Note in full at any time after the Original
Issue Date, and shall prepay this Note as required pursuant to Section 4.09 of the Purchase Agreement, in an amount equal to the Payment
Amount (or, if an Event of Default shall have previously occurred, the Default Amount). The Company must provide at least ten (10) calendar
days’ prior written notice to the Holder of any intended payment or prepayment under this Note following the occurrence of any
Event of Default, during which time the Holder may convert this Note, in whole or in any part, pursuant to Section 4. Prepayment shall
not be offered to any holder of Notes unless prepayment is offered pro rata to all holders of Notes on identical terms.
Section
3. Registration of Transfers and Exchanges.
(a) Different
Denominations. This Note is exchangeable for an equal aggregate Original Principal Amount of Notes of different authorized denominations,
as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.
(b) Investment
Representations. This Note has been issued subject to certain investment representations of the original Holder set forth in the
Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state
securities laws and regulations.
(c) Reliance
on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may
treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment
as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall
be affected by notice to the contrary.
Section
4. Conversion.
(a) Conversion.
Subject to Section 4.07 of the Purchase Agreement, on any date while this Note is outstanding and an Event of Default shall have previously
occurred, the Holder shall have the right, at the Holder’s option, to convert the Default Amount of this Note, in whole or in part
(as the case may be, the “Conversion Amount”), into Conversion Shares by following the mechanics of conversion set
forth in Section 4(b).
(b) Mechanics
of Conversion.
(i) Conversion
Notice. Holder may, at any time and from time to time, convert all or any portion of the Conversion Amount of this Note into Conversion
Shares at the Conversion Price, by delivering to the Company: (A) written notice of its election to convert this Note pursuant to this
Section 4, including the Conversion Amount, and (B) in the case of a Conversion of the entire Conversion Amount of this Note, the original
Note instrument (or a notice to the effect that such original Note has been lost, stolen or destroyed).
(ii) Delivery
of Conversion Shares Upon Conversion. Not later than two (2) Trading Days after the Conversion Date (the “Share Delivery
Date”), the Company shall deliver, or cause to be delivered, to the Holder the Conversion Shares.
(iii) Failure
to Deliver Conversion Shares. If, in the case of any Conversion, the Conversion Shares are not delivered to or as directed by the
applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Company at any time on or
before its receipt of such Conversion Shares to rescind the Conversion, in which event the Company shall promptly return to the Holder
any original Note delivered to the Company and the Holder shall promptly return to the Company the Conversion Shares (if any) issued
to such Holder pursuant to the rescinded Conversion Notice.
(iv) Obligation
Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares upon conversion
of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder
to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any
action to enforce the same, or any set off, counter claim, recoupment, limitation or termination, or any breach or alleged breach by
the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other
Person (unless the Conversion would violate any law applicable to the Company), and irrespective of any other circumstance which might
otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided,
however, that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder.
In the event the Holder of this Note shall elect to convert any or all of the Conversion Amount hereof, the Company may not refuse conversion
based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, agreement
or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part
of this Note shall have been sought and obtained, and the Company posts a surety bond for the benefit of the Holder in the amount of
150% of the Default Amount of this Note, which is subject to the injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to the Holder to the extent it obtains judgment.
In the absence of such injunction, the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion.
If the Company fails for any reason to deliver to the Holder such Conversion Shares pursuant to Section 4(b)(ii) by the 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 Conversion Amount
being converted, $10 per Trading Day (increasing to $20 per Trading Day on the fifth (5th) Trading Day after such liquidated damages
begin to accrue) for each Trading Day after such Share Delivery Date until such Conversion Shares are delivered or Holder rescinds such
conversion. Nothing herein shall prohibit the Holder from seeking to enforce damages pursuant to any other section hereof or under applicable
law.
(v) Reservation
of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized
and unissued Common Shares for the sole purpose of issuance upon Conversion, free from preemptive rights or any other actual contingent
purchase rights of Persons other than the Holder (and the other holders of the Notes). The Company covenants that all Common Shares that
shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable and, if a registration statement
covering the resale of the Conversion Shares is then effective under the Securities Act, shall be registered for public resale in accordance
with such registration statement.
(vi) Fractional
Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note. As to any
fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, 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 Conversion Price
or round up to the next whole share.
(vii) Transfer
Taxes and Expenses. The issuance of Conversion Shares on conversion of this Note shall be made without charge to the Holder hereof
for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares, provided
that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery
of any such Conversion Shares upon conversion in a name other than that of the Holder of this Note so converted and the Company shall
not be required to issue or deliver such Conversion Shares unless or until the Person or Persons requesting the issuance thereof shall
have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.
The Company shall pay all transfer agent fees required for same-day processing of any conversion and all fees to the Depository Trust
Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion
Shares. The Company shall pay all attorney fees required for the issuance of attorney legal opinions for removal of restrictive legends
on Conversion Shares.
(c) Holder’s
Conversion Limitations. The Company shall not affect any conversion of this Note, and a Holder shall not have the right to convert
any portion of this Note, to the extent that after giving effect to the conversion, 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 Common Shares beneficially owned by the Holder and its Affiliates and Attribution Parties shall include
the number of Common Shares issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude
the number of Common Shares which are issuable upon: (i) conversion of the remaining, unconverted Conversion Amount of this Note beneficially
owned by the Holder or any of its Affiliates or Attribution Parties, and (ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained
herein (including, without limitation, any other Notes or the Warrants) 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 4(c), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that
the limitation contained in this Section 4(c) applies, the determination of whether this Note is convertible (in relation to other securities
owned by the Holder together with any Affiliates and Attribution Parties) and of which Conversion Amount of this Note is convertible
shall be in the sole discretion of the Holder. 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
4(c), in determining the number of outstanding Common Shares, the Holder may rely on the number of outstanding Common Shares as stated
in the most recent of the following: (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 Company’s
transfer agent setting forth the number of Common Shares outstanding. Upon the written or oral request of a Holder, the Company shall
within one Trading Day confirm orally and in writing to the Holder the number of Common Shares then outstanding. In any case, the number
of outstanding Common Shares shall be determined after giving effect to the conversion or exercise of securities of the Company, including
this Note, by the Holder or its Affiliates since the date as of which such number of outstanding Common Shares was reported. The “Beneficial
Ownership Limitation” shall be 4.99% of the number of shares of the Common Shares outstanding immediately after giving effect
to the issuance of Common Shares issuable upon conversion of this Note held by the Holder. The Holder, upon notice to the Company, may
increase or decrease the Beneficial Ownership Limitation provisions of this Section 4(c), provided that the Beneficial Ownership Limitation
in no event exceeds 9.99% of the number of shares of the Common Shares outstanding immediately after giving effect to the issuance of
Common Shares upon conversion of this Note held by the Holder and the Beneficial Ownership Limitation provisions of this Section 4(c)
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 Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a
manner otherwise than in strict conformity with the terms of this Section 4(c) to correct this paragraph (or any portion hereof) which
may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein 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 Note.
Section
5. Certain Adjustments.
(a) Stock
Dividends and Stock Splits. If the Company, at any time while this Note is outstanding on or after the date of the occurrence (if
any) of an Event of Default: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in Common Shares on
Common Shares or any Common Shares Equivalents (which, for avoidance of doubt, shall not include any Common Shares issued by the Company
upon conversion of, or payment of interest on, the Notes or the Company’s outstanding Preferred Shares), (ii) subdivides outstanding
Common Shares into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding Common Shares into
a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Shares, any shares of capital stock
of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of Common Shares
(excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number
of Common Shares outstanding immediately after such event. Any adjustment made pursuant to this Section 5 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 at any time while this Note is outstanding on or after the date of the occurrence (if any) of an Event of Default,
the Company issues or sells, announces any offer, sale, or other disposition of, or in accordance with this Section 5 is deemed to have
issued, sold or granted (or makes an announcement regarding the same), any Common Shares and/or Common Shares Equivalents (including
the issuance or sale of Common Shares owned or held by or for the account of the Company, but excluding any securities issued or sold
or deemed to have been issued or sold solely in connection with an Exempt Issuance) for a consideration per share (the “New
Issuance Price”) less than a price equal to the Conversion Price in effect immediately prior to such issuance or sale or deemed
issuance or sale (such Conversion Price then in effect is referred to herein as the “Applicable Price”) (the foregoing
a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the Conversion Price then in effect shall be
reduced to an amount equal to the New Issuance Price; provided, however, that the foregoing adjustment shall only be in effect one time
only. For all purposes of the foregoing (including, without limitation, determining the adjusted Conversion Price and the New Issuance
Price under this Section 5(b)), the following shall be applicable:
(c) Issuance
of Options. If, at any time while this Note is outstanding on or after the date of the occurrence (if any) of an Event of Default,
the Company in any manner grants, issues or sells (or enters into any agreement to grant, issue or sell) any Options (as defined below)
and the lowest price per share for which one Common Shares are at any time issuable upon the exercise of any such Option or upon conversion,
exercise or exchange of any Common Shares Equivalents issuable upon exercise of any such Option or otherwise pursuant to the terms thereof
is less than the Applicable Price, then such Common Shares shall be deemed to be outstanding and to have been issued and sold by the
Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 5(c), the “lowest
price per share for which one Common Shares are at any time issuable upon the exercise of any such Options or upon conversion, exercise
or exchange of any Common Shares Equivalents issuable upon exercise of any such Option or otherwise pursuant to the terms thereof”
shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company
with respect to any one share of Common Shares upon the granting, issuance or sale of such Option, upon exercise of such Option and upon
conversion, exercise or exchange of any Common Shares Equivalents issuable upon exercise of such Option or otherwise pursuant to the
terms thereof and (y) the lowest exercise price set forth in such Option for which one Common Shares are issuable (or may become issuable
assuming all possible market conditions) upon the exercise of any such Options or upon conversion, exercise or exchange of any Common
Shares Equivalents issuable upon exercise of any such Option or otherwise pursuant to the terms thereof minus (2) the sum of all amounts
paid or payable to the holder of such Option (or any other Person) upon the granting, issuance or sale of such Option, upon exercise
of such Option and upon conversion, exercise or exchange of any Common Shares Equivalents issuable upon exercise of such Option or otherwise
pursuant to the terms thereof plus the value of any other consideration received or receivable by, or benefit conferred on, the holder
of such Option (or any other Person). Except as contemplated below, no further adjustment of the Conversion Price shall be made upon
the actual issuance of such Common Shares or of such Common Shares Equivalents upon the exercise of such Options or otherwise pursuant
to the terms of or upon the actual issuance of such Common Shares upon conversion, exercise or exchange of such Common Shares Equivalents.
“Option” means any rights, warrants or options to subscribe for or purchase Common Shares or Convertible Securities
other than Exempt Issuances. “Convertible Securities” means any shares or other security (other than Options) that
is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise
entitles the holder thereof to acquire, any Common Shares.
(d) Issuance
of Convertible Securities. If, at any time while this Note is outstanding on or after the date of the occurrence (if any) of an Event
of Default, the Company in any manner issues or sells (or enters into any agreement to issue or sell) any Common Shares Equivalents and
the lowest price per share for which one share of Common Shares are at any time issuable upon the conversion, exercise or exchange thereof
or otherwise pursuant to the terms thereof is less than the Applicable Price, then such Common Shares shall be deemed to be outstanding
and to have been issued and sold by the Company at the time of the issuance or sale of such Common Shares Equivalents for such price
per share. For the purposes of this Section 5(d), the “lowest price per share for which one Common Shares are at any time issuable
upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of
(x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one Common Shares upon
the issuance or sale of the Common Shares Equivalents and upon conversion, exercise or exchange of such Common Shares Equivalents or
otherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Common Shares Equivalents for which one
share of Common Shares are issuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange
thereof or otherwise pursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Common Shares
Equivalents (or any other Person) upon the issuance or sale of such Common Shares Equivalents plus the value of any other consideration
received or receivable by, or benefit conferred on, the holder of such Common Shares Equivalents (or any other Person). Except as contemplated
below, no further adjustment of the Conversion Price shall be made upon the actual issuance of such Common Shares upon conversion, exercise
or exchange of such Common Shares Equivalents or otherwise pursuant to the terms thereof, and if any such issuance or sale of such Common
Shares Equivalents is made upon exercise of any Options for which adjustment of this Note has been or is to be made pursuant to other
provisions of this Section 5(d), except as contemplated below, no further adjustment of the Conversion Price shall be made by reason
of such issuance or sale.
(e) Change
in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration,
if any, payable upon the issue, conversion, exercise or exchange of any Common Shares Equivalents, or the rate at which any Common Shares
Equivalents are convertible into or exercisable or exchangeable for Common Shares increases or decreases at any time (other than proportional
changes in conversion or exercise prices, as applicable, in connection with an event referred to in Section 5(a)), the Conversion Price
in effect at the time of such increase or decrease shall be adjusted to the Conversion Price which would have been in effect at such
time had such Options or Common Shares Equivalents provided for such increased or decreased purchase price, additional consideration
or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section
5(e), if the terms of any Option or Common Shares Equivalents that was outstanding as of the date this Note was issued are increased
or decreased in the manner described in the immediately preceding sentence, then such Option or Common Shares Equivalents and the Common
Shares deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase
or decrease. No adjustment pursuant to this Section 5(e) shall be made if such adjustment would result in an increase of the Conversion
Price then in effect.
(f) Change
in Option Price or Rate of Conversion. If any Option and/or Common Shares Equivalents and/or Adjustment Right (as defined below)
is issued in connection with the issuance or sale or deemed issuance or sale of any other securities of the Company (as determined by
the Holder, the “Primary Security”, and such Option and/or Common Shares Equivalents and/or Adjustment Right (as defined
below), the “Secondary Securities”), together comprising one integrated transaction, (or one or more transactions
if such issuances or sales or deemed issuances or sales of securities of the Company either (A) have at least one investor or purchaser
in common, (B) are consummated in reasonable proximity to each other and/or (C) are consummated under the same plan of financing) the
aggregate consideration per share of Common Shares with respect to such Primary Security shall be deemed to be equal to the difference
of (x) the lowest price per share for which one Common Shares was issued (or was deemed to be issued pursuant to Section 5(a)(i) or 5(a)(ii)
above, as applicable) in such integrated transaction solely with respect to such Primary Security, minus (y) with respect to such Secondary
Securities, the sum of the fair market value (as determined by the Holder in good faith) and the fair market value (as determined by
the Holder) of such Common Shares Equivalents, if any, in each case, as determined on a per share basis in accordance with this Section
5(f). If any Common Shares, Options or Common Shares Equivalents are issued or sold or deemed to have been issued or sold for cash, the
consideration received therefor will be deemed to be the net amount of consideration received by the Company therefor. If any Common
Shares, Options or Common Shares Equivalents are issued or sold for a consideration other than cash, the amount of such consideration
received by the Company will be the fair value of such consideration, except where such consideration consists of publicly traded securities,
in which case the amount of consideration received by the Company for such securities will be the arithmetic average of the “VWAPs”
of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any Common Shares, Options or Common
Shares Equivalents are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving
entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Shares, Options or Common Shares Equivalents (as the case may be). The fair value
of any consideration other than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such
parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation
Event”), the fair value of such consideration will be determined within five (5) Trading Days after the tenth (10th) day following
such Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Holder. The determination of such
appraiser shall be final and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne
by the Company). “Adjustment Right” means any right granted with respect to any securities issued in connection with,
or with respect to, any issuance or sale (or deemed issuance or sale hereunder) of Common Shares (other than rights of the type described
in Sections 5(c) and 5(d) hereof) that could result in a decrease in the net consideration received by the Company in connection with,
or with respect to, such securities (including, without limitation, any cash settlement rights, cash adjustment or other similar rights).
(g) Change
in Option Price or Rate of Conversion. If the Company takes a record of the holders of Common Shares for the purpose of entitling
them (A) to receive a dividend or other distribution payable in Common Shares, Options or in Common Shares Equivalents or (B) to subscribe
for or purchase Common Shares, Options or Common Shares Equivalents, then such record date will be deemed to be the date of the issuance
or sale of the Common Shares deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase (as the case may be).
(h) Subsequent
Rights Offerings. In addition to any adjustments pursuant to Section 5(a) above, if at any time while this Note is outstanding on
or after the date of the occurrence (if any) of an Event of Default, the Company grants, issues or sells any Common Shares Equivalents
or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Shares
(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 Common Shares acquirable upon
complete conversion of this Note (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 Common Shares are to be determined for the grant, issue or
sale of such Purchase Rights (provided, however, that, 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 Common Shares 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).
(i) Pro
Rata Distributions. During such time as this Note is outstanding on or after the date of the occurrence (if any) of an Event of Default,
if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of
Common Shares, 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 Note, 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 Common Shares acquirable upon complete conversion of this Note (without regard to any limitations on conversion
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 Common Shares are to be determined for
the participation in such Distribution (provided, however, that, 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 Common Shares 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).
(j) Fundamental
Transaction. If, at any time while this Note is outstanding on or after the date of the occurrence (if any) of an Event of Default:
(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, (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, at any time
while this Note is outstanding on or after the date of the occurrence (if any) of an Event of Default, holders of Common Shares 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 Shares, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Shares or any compulsory share exchange pursuant to which the Common Shares are 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, merger or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of
the outstanding Common Shares (not including any Common Shares 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 conversion of this Note, the Holder shall have the right to
receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental
Transaction (without regard to any limitation in Section 4(c) on the conversion of this Note), the number of Common Shares 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 Common Shares for which
this Note is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4(c) on the conversion
of this Note). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply
to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Shares
in such Fundamental Transaction, and the Company shall apportion the Conversion 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 Shares 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 conversion of this Note following such Fundamental Transaction. 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 Note and the other Transaction Documents (as defined in the Purchase
Agreement) in accordance with the provisions of this Section 5(j) 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 of this Note, deliver to the Holder in exchange for this Note a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to this Note which is convertible for a corresponding number of shares of capital
stock of such Successor Entity (or its parent entity) equivalent to the Common Shares acquirable and receivable upon conversion of this
Note (without regard to any limitations on the conversion of this Note) prior to such Fundamental Transaction, and with a conversion
price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the
Common Shares pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital
stock and such conversion price being for the purpose of protecting the economic value of this Note 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 Note 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 Note and the other Transaction Documents with the same effect as if such Successor Entity had been named as
the Company herein.
(k) Calculations.
All calculations under this Section 5 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 5, the number of Common Shares deemed to be issued and outstanding as of a given date shall be the sum of the number
of Common Shares (excluding any treasury shares of the Company) issued and outstanding.
(l) Adjustment
to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall promptly
deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
(m) Conversion
Floor. Notwithstanding anything in Section 4 or Section 5 of this Note to the contrary, the Holder shall not be entitled to utilize
a Conversion Price of less than $0.01 per share.
Section
6. Negative Covenants. As long as any portion of this Note remains outstanding, unless the holders of a majority in Original
Principal Amount of the then outstanding Notes shall have otherwise given prior written consent, the Company shall not, and shall not
permit any of its Subsidiaries (if any) to, directly or indirectly:
(a) other
than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any Indebtedness;
(b) amend
its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and
adversely affects any rights of the Holder unless consented to by the Holder;
(c) repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of Common Shares or Common Shares Equivalents
other than as to (i) the Conversion Shares or Warrant Shares as permitted or required under the Transaction Documents, (ii) repurchases
of Common Shares or Common Shares Equivalents of departing officers and directors of the Company, provided that such repurchases shall
not exceed an aggregate of $25,000 for all officers and directors during the term of this Note, (iii) repurchases of Common Shares or
Common Shares Equivalents, pursuant to existing repurchase agreements, provided that such repurchases shall not exceed an aggregate of
$25,000 during the term of this Note, or (iv) Common Shares and Common Shares Equivalents which do not vest or are otherwise forfeited,
provided (in case of forfeiture) that such Common Shares and Common Shares Equivalents are not acquired for cash;
(d) repay,
repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness, other than (i) the Notes if on a pro-rata basis, and
(ii) regularly scheduled principal and interest payments under outstanding Indebtedness or Permitted Indebtedness;
(e) pay
cash dividends or distributions on any equity securities of the Company;
(f) enter
into any material transaction with any Affiliate of the Company, unless such transaction is made on an arm’s-length basis and expressly
approved by a majority of the disinterested directors of the Company (even if less than a quorum otherwise required for board approval);
(g) create,
permit or suffer to exist any Lien on any of its or any Subsidiaries properties and assets other than Permitted Liens; or
(h) enter
into any agreement with respect to any of the foregoing.
Section
7. Events of Default.
(a) “Event
of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event
shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order,
rule or regulation of any administrative or governmental body):
(i) any
default in the payment of the Payment Amount on the Maturity Date;
(ii) the
Company’s listing on its current Trading Market shall have been terminated or suspended;
(iii) the
Company shall fail to timely file any required periodic reports or other information required on the part of the Company under the Exchange
Act;
(iv) the
Company shall fail to deliver (or cause to be delivered) Conversion Shares upon any Conversion of this Note on the relevant Shares Delivery
Date;
(v) the
Company shall fail to observe or perform any other covenant or agreement contained in the Notes (other than a breach by the Company of
its obligations to deliver Common Shares to the Holder upon conversion, which breach is addressed in clause (viii) below) or in any Transaction
Document, which failure is not cured, if possible to cure, within the earlier to occur of (A) five (5) Trading Days after notice of such
failure sent by the Holder or by any other Holder to the Company and (B) seven (7) Trading Days after the Company has become or should
have become aware of such failure;
(vi) a
default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument) shall
occur under any other material agreement, lease, document or instrument to which the Company or any Subsidiary is obligated, which default
or event of default is not cured, if possible to cure, within the earlier to occur of (A) five (5) Trading Days after notice of such
failure sent by the Holder or by any other Holder to the Company and (B) seven (7) Trading Days after the Company has become or should
have become aware of such failure;
(vii) the
Company or any “Significant Subsidiary” (as such term is defined in Rule 1-02(w) of Regulation S-X) shall cease operations,
or make a make a public announcement to do so, or shall be subject to a Bankruptcy Event;
(viii) the
Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of all or
in excess of 33% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change
of Control Transaction);
(ix) the
Company shall fail for any reason to deliver Conversion Shares to a Holder prior to the fifth (5th) Trading Day after a Conversion
Date pursuant to Section 4(b) or the Company shall provide at any time notice to the Holder, including by way of public announcement,
of the Company’s intention to not honor requests for conversions of any Notes in accordance with the terms hereof; and
(x) a
final non-appealable judgment by any competent court in Canada or the United States for the payment of money in an amount of at least
$50,000 is rendered against the Company, and the same remains undischarged and unpaid for a period of 45 days during which execution
of such judgment is not effectively stayed.
(b) Remedies
Upon Event of Default. If any Event of Default occurs, the Default Amount of this Note shall become immediately due and payable,
at the Holder’s election, in cash or in Common Shares at the Conversion Price then in effect. Upon the payment or conversion in
full of the Default Amount in accordance with the terms of this Note, the Holder shall promptly surrender this Note to or as directed
by the Company. The Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind,
and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and
all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior
to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full
payment pursuant to this Section 7(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right
consequent thereon.
Section
8. Miscellaneous.
(a) Notices.
Any and all notices or other communications or deliveries to be provided by the Holder hereunder shall be in writing and delivered personally,
by email attachment, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth
on in the Purchase Agreement, or such other, email address, or address as the Company may specify for such purposes by notice to the
Holder delivered in accordance with this Section 8(a). Any and all notices or other communications or deliveries to be provided by the
Company hereunder shall be in writing and delivered personally, by facsimile, by email attachment, or sent by a nationally recognized
overnight courier service addressed to each Holder at the facsimile number, email address or address of the Holder appearing on the books
of the Company, or if no such facsimile number or email attachment or address appears on the books of the Company, at the principal place
of business of such Holder, as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be
deemed given and effective on the earliest of: (i) the date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number or email attachment to the email address set forth on the signature pages attached hereto prior to 5:30 p.m.
(Eastern time) on any date, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number or email attachment to the email address set forth on the signature pages attached hereto on a day
that is not a Business Day or later than 5:30 p.m. (Eastern time) on any Business Day, (iii) the second Business Day following the date
of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice
is required to be given.
(b) Absolute
Obligation; Ranking. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Note at
the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company. This
Note: (i) is a direct, subordinated debt obligation of the Company; and (ii) ranks junior to the Senior Indebtedness and pari-passu
with all other Notes now or hereafter issued under the terms of the Purchase Agreement.
(c) Subordination.
All claims of the Holder to principal, interest and any other amounts at any time owed under this Note (collectively, “Junior
Indebtedness”) are hereby expressly subordinated in right of payment, as herein set forth, to the prior payment in full of
all Senior Indebtedness (as defined below). No payment under Junior Indebtedness shall be made by the Company, nor shall the Holder exercise
any remedies under the Junior Indebtedness (including taking any legal action (whether judicial or otherwise) to collect the Junior Indebtedness),
if, at the time of such payment, exercise or immediately after giving effect thereto, (i) there shall exist any “Default”
or “Event of Default” under any agreements governing any of the Senior Indebtedness or (ii) the maturity of any of the Senior
Indebtedness has been accelerated and such acceleration has not been waived or such Senior Indebtedness has not been paid in full; provided,
however, that (x) in the event that the holder of any Senior Indebtedness accelerates such Senior Indebtedness, then the Holder may accelerate
the indebtedness evidenced by this Note, and (y) if the Company is permitted under the terms of the Senior Indebtedness to pay an amount
due and owing under this Note and fails to make such payment, then so long as the terms of the Senior Indebtedness do not prohibit such
action, the Holder may exercise its rights to be paid such amount, but only such amount (and Holder shall not be permitted to accelerate
hereunder). Each holder of any Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the issuance
of this Note, shall be entitled to rely on the subordination provisions set forth in this Note. Upon the request of the Company or any
holder of Senior Indebtedness, the Holder shall confirm (in writing) the above subordination provisions and shall execute and deliver
such additional subordination agreements as any holder of Senior Indebtedness may require. For purposes hereof, “Senior Indebtedness”
means, all indebtedness of the Company, whether outstanding on the date of the execution of this Note or thereafter created, to the following
lenders to the Company: SILAC Insurance Company, Leonite Capital LLC, Leonite Fund I, LP and Mast Hill Fund, L.P.
(d) Lost
or Mutilated Note. The Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note,
or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the Original Principal Amount of this Note so mutilated,
lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof,
reasonably satisfactory to the Company.
(e) Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed
and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflict of laws thereof.
Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated
by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal courts sitting in the County of New York, New York (the
“New York Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts
for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New
York Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees
that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of
or relating to this Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any
provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorney’s
fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
(f) Waiver.
Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder
to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party
of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion. Any waiver
by the Company or the Holder must be in writing.
(g) Severability.
If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision
is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it
shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable
rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The
Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company
from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully
do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such
as though no such law has been enacted.
(h) Remedies,
Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and
in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including
a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual
and consequential damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that
there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided
for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the
Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof).
The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy
at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach,
the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened
breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide
all information and documentation to the Holder that is reasonably requested by the Holder to enable the Holder to confirm the Company’s
compliance with the terms and conditions of this Note.
(i) Next
Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day.
(j) Headings.
The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect
any of the provisions hereof.
Section
9. Amendments; Waivers. Any modifications, amendments or waivers of the provisions hereof shall be subject to Section 5.05
of the Purchase Agreement.
Section
10. Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever
claim and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at
any time hereafter in force, in connection with any Action or Proceeding that may be brought by any Holder in order to enforce any right
or remedy under any Transaction Document. Notwithstanding any provision to the contrary contained in any Transaction Document, it is
expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest
shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting
the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate. It is agreed that
if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute
or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the
Maximum Rate applicable to the Transaction Documents from the effective date thereof forward, unless such application is precluded by
applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Holder with
respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Holder to the unpaid principal amount
of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Holder’s election.
IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.
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1847 HOLDINGS LLC |
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|
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By: |
|
| |
Name: |
Ellery W. Roberts |
| |
Title: |
Chief Executive Officer |
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