☐ Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
☐ Fee paid previously with preliminary materials.
☐ Fee computed on table in exhibit required by Item 25(b) per
Exchange Act Rules 14a- 6(i)(1) and 0-11
You are cordially invited
to attend the 2023 Annual Meeting of Shareholders (the “Annual Meeting”) of 1847 Holdings LLC (“we”, “us,”
“our” or “Company”), which is scheduled to be held on Tuesday, May 9, 2023 at 2:00 PM Eastern Time. The Annual
Meeting will be a virtual shareholder meeting, conducted via live webcast, through which you can submit questions and vote online. The
Annual Meeting can be accessed by visiting: . Shareholders of record of the Company at the close of business on March 31, 2023 are entitled
to notice of, and to vote at, the Annual Meeting. Details of the business to be conducted at the Annual Meeting are given in the accompanying
Notice of Annual Meeting of Shareholders and the Proxy Statement. The Proxy Statement was first sent or given to our shareholders on
or about , 2023. You should also have received a Proxy Card or Voting Instruction Form and postage-paid return envelope, which are being
solicited on behalf of our Board of Directors (the “Board”).
After reading the Notice
of Annual Meeting of Shareholders and the Proxy Statement, please mark your votes on the accompanying Proxy Card or Voting Instruction
Form, sign it and promptly return it in the accompanying postage-paid envelope. You may also vote by Internet or telephone as instructed
in the proxy statement or on the Proxy Card or Voting Instruction Form. Please vote by whichever method is most convenient for you to
ensure that your shares are represented at the Annual Meeting.
It is very important that
your shares be represented and voted at the Annual Meeting. Whether or not you plan to attend, we hope you will vote as soon as possible.
You may vote over the Internet, as well as by telephone, or by mailing the Proxy Card or Voting Instruction Form. Returning the proxy
or voting by Internet or telephone does not deprive you of your right to attend the Annual Meeting and to vote your shares.
We look forward to seeing
you at the Annual Meeting. Your vote and participation, no matter how many or how few shares you own, are very important to us. Your
cooperation is greatly appreciated.
The attached Notice of Annual
Meeting of Shareholders and Proxy Statement are first being made available to shareholders of record beginning , 2023. If you have any
questions or require assistance in authorizing a proxy or voting your common shares, please contact the Company at the contact listed
below:
Annual Reports
We have filed our Annual
Report on Form 10-K for the fiscal year ended December 31, 2022 with the SEC, a copy of which, including the financial statements
and financial statement schedules, but excluding exhibits, has been mailed to our shareholders along with this Proxy Statement. Exhibits
to the Annual Report on Form 10-K are available upon payment of a reasonable fee, which is limited to our expenses in furnishing
the requested exhibit. All requests for such exhibits should be directed to 1847 Holdings LLC, 590 Madison Avenue, 21st Floor, New York,
NY 10022, Attention Secretary. Our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 is also available
on our IR site under the link for “SEC Filings.”
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By Order of the Board of Directors, |
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New York, NY |
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Ellery W. Roberts |
, 2023 |
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Chairman and CEO |
1847 Holdings LLC | 28 | 2023 Proxy Statement |
Annex A
Forms of Investment Documents
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE
AGREEMENT (the “Agreement”), dated as of February ____, 2023, by and between 1847 HOLDINGS LLC, a Delaware limited
liability company, with headquarters located at 590 Madison Avenue, 21st Floor, New York, NY 10022 (the “Company”), and ___________,
a ___________, with its address at ______________ (the “Buyer”).
WHEREAS:
A. The
Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded
by Section 4(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”) and Rule 506(b) promulgated by the United States
Securities and Exchange Commission (the “SEC”) under the 1933 Act; and
B. The
Company intends to enter into securities purchase agreements on the same terms as this Agreement (the “February 2023 Purchase Agreements”)
for the issuance of promissory notes in the aggregate principal amount of up to $___________ (including the principal amount of the Note
(as defined below)) (collectively the “February 2023 Notes”), up to ________ Common Shares (as defined below) as a commitment
fee (collectively, the “February 2023 Commitment Shares”), common share purchase warrants for the purchase of up to _________
Common Shares at an initial price per share of $4.20 (collectively, the “February 2023 Base Warrants”), as well as common
share purchase warrants for the purchase of up to ________ Common Shares at an initial price per share of $0.01 (which are being issued
to the February 2023 Buyers (as defined in this Agreement) only to the extent identified in the respective February 2023 Purchase Agreements
due to beneficial ownership limitations in the February 2023 Transaction Documents (as defined in this Agreement)) (collectively, the
“February 2023 Penny Warrants”, and together with the February 2023 Base Warrants, the “February 2023 Warrants”)
(the February 2023 Notes, February 2023 Commitment Shares, and February 2023 Warrants are collectively referred to herein as the “February
2023 Securities”) (for the avoidance of doubt, the Securities (as defined in this Agreement) are being issued as part of the February
2023 Securities); and
C. All
of the purchasers of the February 2023 Securities, including the Buyer under this Agreement, shall collectively be referred to herein
as the “February 2023 Buyers”; and
D. Buyer
desires to purchase from the Company, and the Company desires to issue and sell to the Buyer, upon the terms and conditions set forth
in this Agreement, a promissory note of the Company, in the aggregate principal amount of $___________ (as the principal amount thereof
may be increased pursuant to the terms thereof, and together with any note(s) issued in replacement thereof or as a dividend thereon or
otherwise with respect thereto in accordance with the terms thereof, in the form attached hereto as Exhibit A, the “Note”),
convertible into common shares of the Company (the “Common Shares”), upon the terms and subject to the limitations and conditions
set forth in such Note; and
E. The
Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of the Note as is set forth immediately
below its name on the signature pages hereto; and
F. The
Company wishes to issue a common share purchase warrant to purchase _________ Common Shares at an initial price per share of $4.20 (the
“Warrant”) and Commitment Shares (as defined below) to the Buyer as additional consideration for the purchase of the Note,
which shall be earned in full as of the Closing Date, as further provided herein.
NOW THEREFORE, in consideration of the foregoing
and of the agreements and covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Company and the Buyer hereby agree as follows:
1. Purchase
and Sale of Note.
a. Purchase
of Note. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer, and the Buyer agrees to purchase from
the Company, the Note, as further provided herein. As used in this Agreement, the term “business day” shall mean any day other
than a Saturday, Sunday, or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive
order to remain closed.
b. Form
of Payment. On the Closing Date: (i) the Buyer shall pay the purchase price of $__________ (the “Purchase Price”) for
the Note, to be issued and sold to it at the Closing (as defined below), by wire transfer of immediately available funds to the Company,
in accordance with the Company’s written wiring instructions, against delivery of the Note, and (ii) the Company shall deliver such
duly executed Note and Warrant on behalf of the Company, to the Buyer, against delivery of such Purchase Price. On the Closing, the Buyer
shall withhold a non-accountable sum of $15,000.00 from the Purchase Price to cover the Buyer’s legal fees in connection with the
transactions contemplated by this Agreement.
c. Closing
Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 7 and Section 8 below, the date
and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be on the date that the
Purchase Price for the Note is paid by Buyer pursuant to terms of this Agreement.
d. Closing.
The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location
as may be agreed to by the parties (including via exchange of electronic signatures).
2. Warrant;
Commitment Shares. On or before the Closing Date, the Company shall issue the Warrant to the Buyer pursuant to the terms of contained
therein. On or before the Closing Date, the Company shall issue ________ Common Shares (the “Commitment Shares”) to the Buyer,
which shall be earned in full as of the Closing Date.
3. Buyer’s
Representations and Warranties. The Buyer represents and warrants to the Company as of the Closing Date that:
a. Investment
Purpose. As of the Closing Date, the Buyer is purchasing the Note, Commitment Shares, and Warrant (the Note, Commitment Shares, Warrant,
Common Shares issuable upon conversion of or otherwise pursuant to the Note (the “Conversion Shares”), and the Common Shares
issuable upon exercise of or otherwise pursuant to the Warrant (the “Exercise Shares”) shall collectively be referred to herein
as the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof, except
pursuant to sales registered or exempted from registration under the 1933 Act; provided, however, that by making the representations
herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose
of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.
b. Accredited
Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited
Investor”).
c. Reliance
on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from
the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy
of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer
set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.
d. Information.
The Buyer and its advisors, if any, have been, and for so long as the Note remains outstanding will continue to be, furnished with all
materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities
which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for so long as the Note remains
outstanding will continue to be, afforded the opportunity to ask questions of the Company regarding its business and affairs. Notwithstanding
the foregoing, the Company has not disclosed to the Buyer any material nonpublic information regarding the Company or otherwise and will
not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the
Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall
modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 4 below.
e. Governmental
Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed
upon or made any recommendation or endorsement of the Securities.
f. Transfer
or Re-sale. The Buyer understands that (i) the sale or resale of the Securities has not been and is not being registered under the
1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant
to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company, at the cost of the Company,
an opinion of counsel (which may be the Legal Counsel Opinion (as defined below)) that shall be in form, substance and scope customary
for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred
to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of
the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 3( f) and who is an Accredited
Investor, (d) the Securities are sold pursuant to Rule 144 or other applicable exemption, or (e) the Securities are sold pursuant to Regulation
S under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost
of the Company, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance
with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may
require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither
the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or
to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything else contained
herein to the contrary, the Securities may be pledged in connection with a bona fide margin account or other lending arrangement
secured by the Securities, and such pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder,
and the Buyer in effecting such pledge of Securities shall be not required to provide the Company with any notice thereof or otherwise
make any delivery to the Company pursuant to this Agreement or otherwise.
g. Legends.
The Buyer understands that until such time as the Note, Warrant, Commitment Shares, Conversion Shares, and/or Exercise Shares, have been
registered under the 1933 Act or may be sold pursuant to Rule 144, Rule 144A under the 1933 Act, Regulation S, or other applicable exemption
without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Securities may bear
a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such Securities):
“NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE/EXERCISABLE]
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A, REGULATION S, OR OTHER APPLICABLE
EXEMPTION UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
The legend set forth above
shall be removed and the Company shall issue a certificate or book entry statement for the applicable Common Shares without such legend
to the holder of any Security upon which it is stamped or (as requested by such holder) issue the applicable Common Shares to such holder
by electronic delivery by crediting the account of such holder’s broker with The Depository Trust Company (“DTC”),
if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration
statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption
without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) the Company or
the Buyer provides the Legal Counsel Opinion (as contemplated by and in accordance with Section 5(l) hereof) to the effect that a public
sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company
so that the sale or transfer is effected. The Company shall be responsible for the fees of its transfer agent and all DTC fees associated
with any such issuance. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend
has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept
the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such
as Rule 144, Rule 144A, Regulation S, or other applicable exemption at the Deadline (as defined in the Note), it will be considered an
Event of Default pursuant to Section 3.2 of the Note.
h. Authorization;
Enforcement. This Agreement has been duly and validly authorized by the Buyer and has been duly executed and delivered on behalf of
the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights
generally and except as may be limited by the exercise of judicial discretion in applying principles of equity.
4. Representations
and Warranties of the Company. The Company represents and warrants to the Buyer as of the Closing Date that, except as set forth in
the SEC Documents:
a. Organization
and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a company duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it is incorporated or formed, with full power and authority (corporate
and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and
conducted. The Company and each of its Subsidiaries is duly qualified as a foreign company to do business and is in good standing in every
jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary
except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. “Material Adverse Effect”
means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries,
if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection
herewith. “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the
Company owns, directly or indirectly, any equity or other ownership interest.
b. Authorization;
Enforcement. The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note, and to
consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof,
(ii) the execution and delivery of this Agreement, the Warrant, the Note, Commitment Shares, Conversion Shares, and the Exercise Shares
by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance
of the Note, Warrant, as well as the issuance and reservation for issuance of the Conversion Shares and Exercise Shares issuable upon
conversion of the Note and/or exercise of the Warrant) have been duly authorized by the Company’s Board of Directors and no further
consent or authorization of the Company, its Board of Directors, its shareholders, or its debt holders is required, (iii) this Agreement
and the Note (together with any other instruments executed in connection herewith or therewith) have been duly executed and delivered
by the Company by its authorized representative, and such authorized representative is the true and official representative with authority
to sign this Agreement, the Note and the other instruments documents executed in connection herewith or therewith and bind the Company
accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments
will constitute, a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by general principals of equity, or to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights
and remedies. All closing conditions under the Eyewear Merger Agreement (as defined in this Agreement), including, without limitation,
all conditions in Article VI of the Eyewear Merger Agreement, the completion of accounting and legal due diligence investigations; the
receipt of all authorizations and consents, the receipt of any required consents of any third parties, the release of any security interests,
and delivery of all opinions and documents required for the transfer of the equity interests of Eyewear (as defined in this Agreement)
to 1847 ICU (as defined in this Agreement) have been satisfied, except with respect to the payment of the Cash Portion (as defined in
the Eyewear Merger Agreement).
c. Capitalization;
Governing Documents. As of the date of this Agreement, the authorized capital of the Company consists of: 500,000,000 authorized Common
Shares (of which _________ shares were issued and outstanding), 4,450,460 series A senior convertible preferred shares (of which 1,593,940
shares were issued and outstanding), 583,334 series B senior convertible preferred shares (of which 464,899 shares were issued and outstanding),
and 1,000 allocation shares (of which 1,000 shares were issued and outstanding). All of such outstanding shares of the Company, the Conversion
Shares, and the Exercise Shares, and Commitment Shares are, or upon issuance will be, duly authorized, validly issued, fully paid and
non-assessable. None of the share capital of the Company represented by such shares are subject to preemptive rights or any other similar
rights of the shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. As
of the date of this Agreement, other than as publicly announced prior to such date and reflected in the SEC Documents of the Company (i)
there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings,
claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable
for any shares of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of the Company or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the 1933 Act and (iii) there
are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights
to security holders) that will be triggered by the issuance of any of the Securities. The Company has furnished to the Buyer true and
correct copies of the Company’s Certificate of Formation as in effect on the date hereof (“Certificate of Formation”),
the Company’s operating agreement, as in effect on the date hereof (the “Operating Agreement”), and the terms of all
securities convertible into or exercisable for Common Shares of the Company and the material rights of the holders thereof in respect
thereto.
d. Issuance
of Conversion Shares and Exercise Shares. The Conversion Shares and Exercise Shares are duly authorized and reserved for issuance
and, upon conversion of the Note and/or exercise of the Warrant in accordance with its terms, will be validly issued, fully paid and non-assessable,
and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights
or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.
e. Issuance
of Warrant and Commitment Shares. The issuance of the Warrant and Commitment Shares is duly authorized and will be validly issued,
fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not
be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the
holder thereof.
f. Acknowledgment
of Dilution. The Company understands and acknowledges the potentially dilutive effect of the Conversion Shares and Exercise Shares
to the Common Shares upon the conversion of the Note and/or exercise of the Warrant. The Company further acknowledges that its obligation
to issue, upon conversion of the Note and/or exercise of the Warrant, the Conversion Shares and/or Exercise Shares, are absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
g. No
Conflicts. The execution, delivery and performance of this Agreement and the Note by the Company and the consummation by the Company
of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion
Shares and Exercise Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Formation or Operating
Agreement, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with
notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, note, evidence of indebtedness, indenture, patent, patent license or instrument to which the Company or
any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities
is subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries
is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect), or (iv) trigger any anti-dilution and/or ratchet provision contained
in any other contract in which the Company is a party thereto or any security issued by the Company. Neither the Company nor any of its
Subsidiaries is in violation of its Certificate of Formation, Operating Agreement or other organizational documents and neither the Company
nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both could put the Company
or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take
any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party or by which any property or assets of the Company or any of its
Subsidiaries is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse
Effect. The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as the
Buyer owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity, except where any such violation
would not result in a Material Adverse Effect. Except as specifically contemplated by this Agreement and as required under the 1933 Act
and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing
or registration with, any court, governmental agency, regulatory agency, self-regulatory organization or stock market or any third party
in order for it to execute, deliver or perform any of its obligations under this Agreement and the Note in accordance with the terms hereof
or thereof or to issue and sell the Note in accordance with the terms hereof and, upon conversion of the Note and/or exercise of the Warrant,
issue Conversion Shares and/or Exercise Shares as applicable. All consents, authorizations, orders, filings and registrations which the
Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company
is not in violation of the listing requirements of the Principal Market (as defined herein) and does not reasonably anticipate that the
Common Shares will be delisted by the Principal Market in the foreseeable future. The Company and its Subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing. The “Principal Market” shall mean the principal securities
exchange or trading market where such Common Shares are listed or traded, including but not limited to any tier of the OTC Markets, any
tier of the NASDAQ Stock Market (including NASDAQ Capital Market), or the NYSE American, or any successor to such markets.
h. SEC
Documents; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”)
(all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto
and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “SEC
Documents”). As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at
the time they were filed with the SEC, 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 light of the circumstances under which they were made, not
misleading. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable
law (except for such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates,
the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in
accordance with United States generally accepted accounting principles, consistently applied, during the periods involved and fairly present
in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). Except as set forth in the financial statements of the Company included in the SEC Documents, the
Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent
to September 30, 2022, and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in such financial statements, which, individually or in the aggregate,
are not material to the financial condition or operating results of the Company. The Company is subject to the reporting requirements
of the 1934 Act. The Company has never been a “shell company” as described in Rule 144(i)(1)(i).
i. Absence
of Certain Changes. Since September 30, 2022, there has been no material adverse change and no material adverse development in the
assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting status
of the Company or any of its Subsidiaries.
j. Absence
of Litigation. There is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against
or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material
Adverse Effect. The SEC Documents contain a complete list and summary description of any pending or, to the knowledge of the Company,
threatened material proceeding against or affecting the Company or any of its Subsidiaries, without regard to whether it would have a
Material Adverse Effect. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the
foregoing.
k. Intellectual
Property. The Company and each of its Subsidiaries owns or possesses the requisite licenses or rights to use all patents, patent applications,
patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and
copyrights (“Intellectual Property”) necessary to enable it to conduct its business as now operated (and, as presently contemplated
to be operated in the future); there is no claim or action by any person pertaining to, or proceeding pending, or to the Company’s
knowledge threatened, which challenges the right of the Company or of a Subsidiary with respect to any Intellectual Property necessary
to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); to the best of the
Company’s knowledge, the Company’s or its Subsidiaries’ current and intended products, services and processes do not
infringe on any Intellectual Property or other rights held by any person; and the Company is unaware of any facts or circumstances which
might give rise to any of the foregoing. The Company and each of its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of their Intellectual Property.
l. No
Materially Adverse Contracts, Etc. Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected
in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement
which in the judgment of the Company’s officers has or is expected to have a Material Adverse Effect.
m. Tax
Status. The Company and each of its Subsidiaries has made or filed all federal, state and foreign income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each
of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and
has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for
the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid
taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment
or collection of any foreign, federal, state or local tax. None of the Company’s tax returns is presently being audited by any taxing
authority.
n. Transactions
with Affiliates. Except for arm’s length transactions pursuant to which the Company or any of its Subsidiaries makes payments
in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could obtain from third parties
and other than the grant of options described in the SEC Documents, none of the officers, directors, or employees of the Company is presently
a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers 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 officer, director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
o. Disclosure.
All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement and provided to the Buyer
pursuant to Section 3(d) hereof and otherwise in connection with the transactions contemplated hereby is true and correct in all material
respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or exists with respect
to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which,
under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly
announced or disclosed (assuming for this purpose that the Company’s reports filed under the 1934 Act are being incorporated into
an effective registration statement filed by the Company under the 1933 Act).
p. Acknowledgment
Regarding Buyer’s Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity
of arm’s length purchaser with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges
that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement
and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives or agents in connection
with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’s
purchase of the Securities. The Company further represents to the Buyer that the Company’s decision to enter into this Agreement
has been based solely on the independent evaluation of the Company and its representatives.
q. No
Integrated Offering. 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 in any security or solicited any offers to buy any security under circumstances that would require
registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be
integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval
provisions applicable to the Company or its securities.
r. No
Brokers; No Solicitation. Except with respect to J. H. Darbie & Co., a registered broker-dealer (CRD#: 43520), the Company has
taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating
to this Agreement or the transactions contemplated hereby. The Company acknowledges and agrees that neither the Buyer nor its employee(s),
member(s), beneficial owner(s), or partner(s) solicited the Company to enter into this Agreement and consummate the transactions described
in this Agreement. The Company acknowledges and agrees that the Buyer is not required to be registered as a broker-dealer under the Securities
Exchange Act of 1934 in order to (i) consummate the transactions encompassed by the February 2023 Transaction Documents (as defined in
this Agreement) or (ii) fulfill the Investor’s obligations under the February 2023 Transaction Documents.
s. Permits;
Compliance. The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and
to carry on its business as it is now being conducted (collectively, the “Company Permits”), except where the failure to obtain
any such Company Permit would not result in a Material Adverse Effect, and there is no action pending or, to the knowledge of the Company,
threatened regarding suspension or cancellation of any of the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict
with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually
or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Since September 30, 2022, neither the Company
nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws,
except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material
Adverse Effect.
t. Environmental
Matters.
(i) There
are, to the Company’s knowledge, with respect to the Company or any of its Subsidiaries or any predecessor of the Company, no past
or present violations of Environmental Laws (as defined below), releases of any material into the environment, actions, activities, circumstances,
conditions, events, incidents, or contractual obligations which may give rise to any common law environmental liability or any liability
under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar federal, state, local or foreign laws
and neither the Company nor any of its Subsidiaries has received any notice with respect to any of the foregoing, nor is any action pending
or, to the Company’s knowledge, threatened in connection with any of the foregoing. The term ”Environmental Laws” means
all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively,
“Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved
thereunder.
(ii) Other
than those that are or were stored, used or disposed of in compliance with applicable law, no Hazardous Materials are contained on or
about any real property currently owned, leased or used by the Company or any of its Subsidiaries, and no Hazardous Materials were released
on or about any real property previously owned, leased or used by the Company or any of its Subsidiaries during the period the property
was owned, leased or used by the Company or any of its Subsidiaries, except in the normal course of the Company’s or any of its
Subsidiaries’ business.
(iii) There
are no underground storage tanks on or under any real property owned, leased or used by the Company or any of its Subsidiaries that are
not in compliance with applicable law.
u. Title
to Property. The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free
and clear of all liens, encumbrances and defects except as would not have a Material Adverse Effect. Any real property and facilities
held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions
as would not have a Material Adverse Effect.
v. Insurance.
The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries
are engaged. Neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business
at a cost that would not have a Material Adverse Effect. Upon written request the Company will provide to the Buyer true and correct copies
of all policies relating to directors’ and officers’ liability coverage, errors and omissions coverage, and commercial general
liability coverage.
w. Internal
Accounting Controls. The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the
judgment of the Company’s board of directors, to provide reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is
permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
x. Foreign
Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision
of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
y. Solvency.
The Company (after giving effect to the transactions contemplated by this Agreement) is solvent (i.e., its assets have a fair market
value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured) and
currently the Company has no information that would lead it to reasonably conclude that the Company would not, after giving effect to
the transaction contemplated by this Agreement, have the ability to, nor does it intend to take any action that would impair its ability
to, pay its debts from time to time incurred in connection therewith as such debts mature. The Company’s financial statements for
its most recent fiscal year end and interim financial statements have been prepared assuming the Company will continue as a going concern,
which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
z. No
Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not
be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”).
The Company is not controlled by an Investment Company.
aa. No Off Balance Sheet
Arrangements. There is no transaction, arrangement, or other relationship between the Company or any of its Subsidiaries and an unconsolidated
or other off balance sheet entity that is required to be disclosed by the Company in its 1934 Act filings and is not so disclosed or that
otherwise could be reasonably likely to have a Material Adverse Effect.
bb. No Disqualification
Events. None of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the
Company participating in the offering hereunder, any beneficial owner of 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 1933 Act) connected
with the Company in any capacity at the time of sale (each, an “Issuer Covered Person”) is subject to any of the “Bad
Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the 1933 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.
cc. Manipulation of Price.
The Company has not, and to its knowledge no one acting on its behalf has: (i) taken, directly or indirectly, any action designed to cause
or to result, or that could reasonably be expected to cause or result, in the stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company.
dd. Bank Holding Company
Act. Neither the Company nor any of its Subsidiaries is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”)
and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor
any of its Subsidiaries or 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 Subsidiaries or 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.
ee. Illegal or Unauthorized
Payments; Political Contributions. Neither the Company nor any of its Subsidiaries nor, to the Company’s knowledge, any of the
officers, directors, employees, agents or other representatives of the Company or any of its Subsidiaries or any other business entity
or enterprise with which the Company or any Subsidiary is or has been affiliated or associated, has, directly or indirectly, made or authorized
any payment, contribution or gift of money, property, or services, whether or not in contravention of applicable law, (i) as a kickback
or bribe to any person or (ii) to any political organization, or the holder of or any aspirant to any elective or appointive public office
except for personal political contributions not involving the direct or indirect use of funds of the Company or any of its Subsidiaries.
ff. Breach of Representations
and Warranties by the Company. The Company agrees that if the Company breaches any of the representations or warranties set forth
in this Section 4 in any material respect and in addition to any other remedies available to the Buyer pursuant to this Agreement, it
will be considered an Event of Default under Section 3.4 of the Note.
5. Additional
Covenants, Agreements and Acknowledgements.
a. Best
Efforts. The parties shall use their best efforts to satisfy timely each of the conditions described in Section 7 and 8 of this Agreement.
b. Form
D; Blue Sky Laws. The Company agrees to file a Form D with respect to the Securities if required under Regulation D and to provide
a copy thereof to the Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company
shall reasonably determine is necessary to qualify the Securities for sale to the Buyer at the applicable closing pursuant to this Agreement
under applicable securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification),
and shall provide evidence of any such action so taken to the Buyer on or prior to the Closing Date.
c. Use
of Proceeds. The Company shall use the proceeds for business development, and not for any other purpose, including but not limited
to (i) the repayment of any indebtedness owed to officers, directors or employees of the Company or their affiliates, (ii) the repayment
of any debt issued in corporate finance transactions (including but not limited to promissory notes that have the ability to be converted
into Common Shares), (iii) any loan to or investment in any other corporation, partnership, enterprise or other person (except in connection
with the Company’s currently existing operations), (iv) any loan, credit, or advance to any officers, directors, employees, or affiliates
of the Company, or (v) in violation or contravention of any applicable law, rule or regulation.
d. Right
of Participation and First Refusal.
(i) Other
than Excluded Transactions (as defined in the Note) (the “Excluded Transactions”), from the date of this Agreement until the
Note is extinguished in its entirety, the Company will not, (i) directly or indirectly, offer, sell, grant any option to purchase, or
otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other disposition of) any of its debt, equity, or
equity equivalent securities, including without limitation any debt, preferred shares or other instrument or security that is, at any
time during its life and/or under any circumstances, convertible into, exchangeable, or exercisable for Common Shares (any such offer,
sale, grant, disposition or announcement being referred to as a “Subsequent Placement”)
or (ii) enter into any definitive agreement with regard to the foregoing, in each case unless the Company shall have first complied with
this Section 5(d).
(ii) The
Company shall deliver to the Buyer an irrevocable written notice (the “Offer Notice”) of any proposed or intended Subsequent
Placement, which shall (w) identify and describe the Subsequent Placement, (x) describe the price and other terms upon
which they are to be issued, sold or exchanged, and the number or amount of the securities in the Subsequent Placement to be issued, sold,
or exchanged and (y) offer to issue and sell to or exchange with the Buyer at least one hundred percent (100%) of the securities in the
Subsequent Placement (the “Subsequent Placement Percentage”) (in each case, an “Offer”), provided, however,
that if any of the other February 2023 Notes are outstanding at such time, then the Subsequent Placement
Percentage shall be allocated amongst the February 2023 Notes on a pro rata basis in proportion
to the aggregate principal amount of the February 2023 Notes then held by the February 2023 Buyers. In
the event that any of the February 2023 Buyers elects not to participate in the Subsequent Placement, then their pro rata portion of the
respective Subsequent Placement Percentage shall be offered to the other February 2023 Buyers on a pro rata basis in proportion to the
aggregate principal amount of February 2023 Notes then held by each such other holder.
(iii) To
accept an Offer, in whole or in part, the Buyer must deliver a written notice (the “Notice
of Acceptance”) to the Company prior to the end of the fifth (5th) Trading Day (as defined in the Note) after the Buyer’s
receipt of the Offer Notice (the “Offer Period”), setting forth the amount that the Buyer elects to purchase (the “Subscription
Amount”). The Company shall complete the Subsequent Placement and issue and sell the Subscription Amount to the Buyer upon terms
and conditions (including, without limitation, unit prices and interest rates) set forth in the Offer Notice, unless a change to such
terms and conditions is agreed to in writing between the Company and Buyer.
(iv) Notwithstanding
anything to the contrary contained herein, if the Company desires to modify or amend the terms or conditions of a Subsequent Placement
at any time after the Offer Notice is given to Buyer (provided, however, that such modification or amendment to the terms or conditions
cannot occur during any Offer Period), the Company shall deliver to the Buyer a new Offer Notice and the Offer Period of such new Offer
shall expire at the end of the fifth (5th) Trading Day after the Buyer’s receipt of such new Offer Notice.
(v) Notwithstanding
the foregoing, this Section 5(d) shall not apply to an Excluded Transaction (as defined in
the Note).
(vi) Notwithstanding
the foregoing, this Section 5(d) shall not apply to a Subsequent Placement unless all similar
rights of participation and rights of first refusals granted by the Company prior to the
date of this Agreement have been waived with respect to the specific Subsequent Placement.
e. 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 the Buyer in order to enforce any right or remedy under this
Agreement, the Note and any document, agreement or instrument contemplated thereby. Notwithstanding any provision to the contrary contained
in this Agreement, the Note and any document, agreement or instrument contemplated thereby, it is expressly agreed and provided that the
total liability of the Company under this Agreement, the Note or any document, agreement or instrument contemplated thereby for payments
which under applicable law are 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 which under applicable law in the nature of interest that the Company may be obligated to
pay under this Agreement, the Note and any document, agreement or instrument contemplated thereby exceed such Maximum Rate. It is agreed
that if the maximum contract rate of interest allowed by law applicable to this Agreement, the Note and any document, agreement or instrument
contemplated thereby 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 this Agreement, the Note and any document, agreement or
instrument contemplated thereby 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 the Buyer with respect to indebtedness
evidenced by this Agreement, the Note and any document, agreement or instrument contemplated thereby, such excess shall be applied by
the Buyer to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to
be at the Buyer’s election.
f. Restriction
on Activities. Commencing as of the date first above written, and until the earlier of payment of the Note in full or full conversion
of the Note, the Company shall not, directly or indirectly, without the Buyer’s prior written consent, which consent shall not be
unreasonably withheld: (a) change the nature of its business; or (b) sell, divest, acquire, change the structure of any material assets
other than in the ordinary course of business. For the avoidance of doubt, the Buyer acknowledges and agrees that the nature of the Company’s
business involved operating as an acquisition holding company and acquiring and at times disposing of its controlled subsidiaries.
g. Listing.
The Company will, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Shares on the Principal
Market or any equivalent replacement exchange or electronic quotation system (including but not limited to the Pink Sheets electronic
quotation system) and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or
rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable. The Company shall promptly
provide to the Buyer copies of any notices it receives from the Principal Market and any other exchanges or electronic quotation systems
on which the Common Shares are then traded regarding the continued eligibility of the Common Shares for listing on such exchanges and
quotation systems.
h. Corporate
Existence. The Company will, so long as the Buyer beneficially owns any of the Securities, maintain its corporate existence and shall
not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially
all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations
hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose
Common Stock is listed for trading or quotation on the Principal Market, any tier of the NASDAQ Stock Market, the New York Stock Exchange
or the NYSE American.
i. No
Integration. Except with respect to the February 2023 Securities, the Company shall not make any offers or sales of any security (other
than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933
Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any
shareholder approval provision applicable to the Company or its securities.
j. Compliance
with 1934 Act; Public Information Failures. For so long as the Buyer beneficially owns the Note, Warrant, Conversion Shares, Commitment
Shares, or any Exercise Shares, the Company shall comply with the reporting requirements of the 1934 Act; and the Company shall continue
to be subject to the reporting requirements of the 1934 Act. During the period that the Buyer beneficially owns the Note, if the Company
shall (i) fail for any reason to satisfy the requirements of Rule 144(c)(1), including, without limitation, the failure to satisfy the
current public information requirements under Rule 144(c) or (ii) if the Company has ever been an issuer described in Rule 144(i)(1)(i)
or becomes such an issuer in the future, and the Company shall fail to satisfy any condition set forth in Rule 144(i)(2) (each, a “Public
Information Failure”) then, as partial relief for the damages to the Buyer by reason of any such delay in or reduction of its ability
to sell the Securities (which remedy shall not be exclusive of any other remedies available pursuant to this Agreement, the Note, or at
law or in equity), the Company shall pay to the Buyer an amount in cash equal to three percent (3%) of the Purchase Price on each of the
day of a Public Information Failure and on every thirtieth day (pro rated for periods totaling less than thirty days) thereafter until
the date such Public Information Failure is cured; provided, however, that the total amount payable hereunder shall not exceed nine percent
(9%) of the Purchase Price. The payments to which a holder shall be entitled pursuant to this Section 5( j) are referred to herein as
“Public Information Failure Payments.” Public Information Failure Payments shall be paid on the earlier of (i) the last day
of the calendar month during which such Public Information Failure Payments are incurred and (iii) the third business day after the event
or failure giving rise to the Public Information Failure Payments is cured. In the event the Company fails to make Public Information
Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 5% per month (prorated
for partial months) until paid in full.
k. Acknowledgement
Regarding Buyer’s Trading Activity. Until the Note is fully repaid or fully converted, the Buyer shall not effect any “short
sale” (as such term is defined in Rule 200 of Regulation SHO of the 1934 Act) of the Common Shares which establishes a net short
position with respect to the Common Shares.
l. Legal
Counsel Opinions. Upon the request of the Buyer from to time to time, the Company shall be responsible (at its cost) for promptly
supplying to the Company’s transfer agent and the Buyer a customary legal opinion letter of its counsel (the “Legal Counsel
Opinion”) to the effect that the resale of the Conversion Shares and/or Exercise Shares by the Buyer or its affiliates, successors
and assigns is exempt from the registration requirements of the 1933 Act pursuant to Rule 144 (provided the requirements of Rule 144 are
satisfied and provided the Conversion Shares and/or Exercise Shares are not then registered under the 1933 Act for resale pursuant to
an effective registration statement) or other applicable exemption (provided the requirements of such other applicable exemption are satisfied).
In addition, the Buyer may (at the Company’s cost) at any time secure its own legal counsel to issue the Legal Counsel Opinion,
and the Company will instruct its transfer agent to accept such opinion. The Company hereby agrees that it may never take the position
that it is a “shell company” in connection with its obligations under this Agreement or otherwise.
m. Piggy-Back
Registration Rights. The Company hereby grants to the Buyer the piggy-back registration rights set forth in Exhibit B hereto.
n. Most
Favored Nation. While the Note or any principal amount, interest or fees or expenses due thereunder remain outstanding and unpaid,
the Company shall not enter into any public or private offering of its securities (including securities convertible into Common Shares)
with any individual or entity (an “Other Investor”) that has the effect of establishing rights or otherwise benefiting such
Other Investor in a manner more favorable in any material respect to such Other Investor (even if the Other Investor does not receive
the benefit of such more favorable term until a default occurs under such other security) than the rights and benefits established in
favor of the Buyer by this Agreement or the Note unless, in any such case, the Buyer has been provided with such rights and benefits pursuant
to a definitive written agreement or agreements between the Company and the Buyer. Notwithstanding the foregoing, this Section 4(n) shall
not apply to the Excluded Transactions (as defined in the Note).
o. Subsequent
Variable Rate Transactions. From the date hereof until such time as the Note is fully converted or fully repaid, the Company shall
be prohibited from effecting or entering into an agreement involving a Variable Rate Transaction unless the Variable Rate Transaction
is an Excluded Transaction (as defined in the Note). “Variable Rate Transaction” means a transaction in which the Company
(i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to
receive, additional Common Shares either (A) at a conversion price, exercise price or exchange rate or other price that is based upon,
and/or varies with, the trading prices of or quotations for Common Shares at any time after the initial issuance of such debt or equity
securities or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance
of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business
of the Company or the market for the Common Shares or (ii) enters into any agreement whereby the Company may issue securities at a future
determined price (except with respect to an Equity Line of Credit (as defined in the Note)). The Buyer shall be entitled to obtain injunctive
relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages.
p. Non-Public
Information. The Company covenants and agrees that neither it, nor any other person acting on its behalf will provide the Buyer or
its agents or counsel with any information that constitutes, or the Company reasonably believes constitutes, material non-public information,
unless prior thereto the Buyer shall have consented to the receipt of such information and agreed with the Company to keep such information
confidential. The Company understands and confirms that the Buyer shall be relying on the foregoing covenant in effecting transactions
in securities of the Company. To the extent that the Company delivers any material, non-public information to the Buyer without such Buyer’s
consent, the Company hereby covenants and agrees that such Buyer shall not have any duty of confidentiality to the Company, any of its
Subsidiaries, or any of their respective officers, directors, agents, employees or affiliates, not to trade on the basis of, such material,
non- public information, provided that the Buyer shall remain subject to applicable law. To the extent that any notice provided, information
provided, or any other communications made by the Company, to the Buyer, constitutes or contains material non-public information regarding
the Company or any Subsidiaries, the Company shall simultaneously file such notice or other material information with the SEC pursuant
to a Current Report on Form 8-K. In addition to any other remedies provided by this Agreement or the related transaction documents, if
the Company provides any material non-public information to the Buyer without their prior written consent, and it fails to immediately
(no later than that business day) file a Form 8-K disclosing this material non-public information, it shall pay the Buyer as partial liquidated
damages and not as a penalty a sum equal to $3,000 per day beginning with the day the information is disclosed to the Buyer and ending
and including the day the Form 8-K disclosing this information is filed.
q. D&O
Insurance. Within 60 calendar days of the Closing, the Company shall purchase director and officer insurance on behalf of the Company's
(including its subsidiary) officers and directors for a period of 18 months after the Closing with respect to any losses, claims, damages,
liabilities, costs and expense in connection with any actual or threatened claim or proceeding that is based on, or arises out of their
status as a director or officer of the Company. The insurance policy shall provide for two years of tail coverage.
r. Shareholder
Approval. “Shareholder Approval” means the approval of the holders of a majority of the Company’s outstanding voting
Common Shares, to effectuate the transactions contemplated by the February 2023 Purchase Agreements, including the issuance of all of
the Common Shares underlying the February 2023 Notes, Common Shares underlying the February
2023 Warrants, and February 2023 Commitment Shares, in excess of 19.99% of the issued and outstanding Common Shares on the Closing
Date (the “Exchange Cap”). The Exchange Cap is equal to 835,311 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 Common Stock). The Company shall hold a special meeting of shareholders on or before the date that is ninety (90) calendar
days after the date of this Agreement for the purpose of obtaining Shareholder Approval, with the recommendation of the Company’s
Board of Directors that such proposal be approved, and the Company shall solicit proxies from its shareholders 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. The Company shall use its reasonable best efforts to obtain such Shareholder Approval. If the Company
does not obtain Shareholder Approval at the first meeting, the Company shall call a meeting as often as possible thereafter to seek Shareholder
Approval until the Shareholder Approval is obtained. Until such approval is obtained, none of the
February 2023 Buyers shall be issued in the aggregate, pursuant to the February 2023 Purchase Agreements or upon conversion or exercise,
as applicable, of February 2023 Notes or February 2023 Warrants, Common Shares in an amount greater than the product of the Exchange Cap
multiplied by a fraction, the numerator of which is the purchase price paid by such Buyer pursuant to this Agreement on the Closing Date
and the denominator of which is the aggregate purchase price paid by the February 2023 Buyers for the February 2023 Notes (with respect
to each of the February 2023 Buyers, the “Exchange Cap Allocation”). In the event that any Buyer shall sell or
otherwise transfer any of such Buyer's February 2023 Notes, February 2023 Warrants, or February 2023 Commitment Shares, the transferee
shall be allocated a pro rata portion of such Buyer's Exchange Cap Allocation, and the restrictions of the prior sentence shall apply
to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee. In the event that
any holder of February 2023 Notes or February 2023 Warrants shall convert or exercise all of such holder's February 2023 Notes or February
2023 Warrants into a number of Common Shares which, in the aggregate, is less than such holder's Exchange Cap Allocation, then the difference
between such holder's Exchange Cap Allocation and the number of Common Shares actually issued to such holder shall be allocated to the
respective Exchange Cap Allocations of the remaining holders of February 2023 Notes and February 2023 Warrants on a pro rata basis in
proportion to the aggregate principal amount of February 2023 Notes then held by each such holder. Except with respect to the
Excluded Transactions and under any agreement with the February 2023 Buyers, the Company shall not issue any Common Stock of Common Stock
Equivalents (as defined in this Agreement) beginning on the date of this Agreement and continuing through the date that the Shareholder
Approval is obtained. “Common Stock Equivalents” shall mean any securities of the Company that would entitle the holder thereof
to acquire at any time Common Stock, including without limitation any debt, preferred stock, rights, options, warrants or other instrument
that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
s. Equal
Treatment of February 2023 Buyers. No consideration shall be offered or paid to any of the February 2023 Buyers (or its assignees
or transferees) to amend or consent to a waiver or modification of any provision of any of the February 2023 Purchase Agreements, February
2023 Notes, February 2023 Warrants, or any other ancillary agreements to the February 2023 Purchase Agreements (collectively, the “February
2023 Transaction Documents”) unless the same consideration is also offered to all of the February 2023 Buyers (and its assignees
or transferees). Further, the Company shall not make any payment of principal or interest on the February 2023 Notes in amounts which
are disproportionate to the respective principal amounts outstanding on the February 2023 Notes at any applicable time. For clarification
purposes, this provision constitutes a separate right granted to each of the February 2023 Buyers (and its assignees or transferees) by
the Company and negotiated separately by each of the February 2023 Buyers, and is intended for the Company to treat the February 2023
Buyers as a class and shall not in any way be construed as the February 2023 Buyers acting in concert or as a group with respect to the
purchase, disposition or voting of securities of the Company or otherwise.
t. No
Broker-Dealer Acknowledgement. Absent a final adjudication from a court of competent jurisdiction stating otherwise, the Company shall
not to any person, institution, governmental or other entity, state, claim, allege, or in any way assert, that Buyer is currently, or
ever has been, a broker-dealer under the Securities Exchange Act of 1934.
u. Breach
of Covenants. The Company acknowledges and agrees that if the Company breaches any of the covenants set forth in this Section 5, in
addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of Default under Section
3.3 of the Note.
6. Transfer
Agent Instructions. The Company shall issue irrevocable instructions to the Company’s transfer agent to issue certificates and/or
issue shares electronically at the Buyer’s option, registered in the name of the Buyer or its nominee, upon conversion of the Note
and/or exercise of the Warrant, the Conversion Shares and Exercise Shares, in such amounts as specified from time to time by the Buyer
to the Company in accordance with the terms thereof (the “Irrevocable Transfer Agent Instructions”). In the event that the
Company proposes to replace its transfer agent, the Company shall provide, prior to the effective date of such replacement, a fully executed
Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to this Agreement (including but not limited to the
provision to irrevocably reserved Common Shares in the Reserved Amount (as defined in the Note)) signed by the successor transfer agent
to the Company and the Company. Prior to registration of the Conversion Shares and/or Exercise Shares under the 1933 Act or the date on
which the Conversion Shares and/or Exercise Shares may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption
without any restriction as to the number of Securities as of a particular date that can then be immediately sold, all such certificates
or book entry shares shall bear the restrictive legend specified in Section 3(g) of this Agreement. The Company warrants that: (i) no
instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5 will be given by the Company to its transfer
agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided
in this Agreement and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer
agent in transferring (or issuing)(electronically or in certificated form) any certificate for Securities to be issued to the Buyer upon
conversion of or otherwise pursuant to the Note and/or upon exercise of or otherwise pursuant to the Warrant as and when required by the
Note and this Agreement; (iii) it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders
its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate
for any Securities issued to the Buyer upon conversion of or otherwise pursuant to the Note and/or upon exercise of or otherwise pursuant
to the Warrant as and when required by the Note, Warrant, and/or this Agreement and (iv) it will provide any required corporate resolutions
and issuance approvals to its transfer agent within 6 hours of each conversion of the Note and/or exercise of the Warrant. Nothing in
this Section shall affect in any way the Buyer’s obligations and agreement set forth in Section 3(g) hereof to comply with all applicable
prospectus delivery requirements, if any, upon re-sale of the Securities. If the Buyer provides the Company, at the cost of the Company,
with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public
sale or transfer of such Securities may be made without registration under the 1933 Act and such sale or transfer is effected or (ii)
the Buyer provides reasonable assurances that the Securities can be sold pursuant to 144, Rule 144A, Regulation S, or other applicable
exemption, the Company shall permit the transfer, and, in the case of the Securities, promptly instruct its transfer agent to issue one
or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this
Section 5 may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section,
that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate
transfer, without the necessity of showing economic loss and without any bond or other security being required.
7. Conditions
to the Company’s Obligation to Sell. The obligation of the Company hereunder to issue and sell the Note to the Buyer at the
Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions thereto, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:
a. The
Buyer shall have executed this Agreement and delivered the same to the Company.
b. The
Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.
c. The
representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the
Closing Date, as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer
shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement
to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.
d. No
litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
8. Conditions
to The Buyer’s Obligation to Purchase. The obligation of the Buyer hereunder to purchase the Note, on the Closing Date, is subject
to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Buyer’s
sole benefit and may be waived by the Buyer at any time in its sole discretion:
a. The
Company shall have executed this Agreement and delivered the same to the Buyer.
b. The
Company shall have delivered to the Buyer the duly executed Note in such denominations as the Buyer shall request and in accordance with
Section 1(b) above.
c. The
Company shall have delivered to the Buyer the Warrant and Commitment Shares.
d. The
Irrevocable Transfer Agent Instructions, in form and substance satisfactory to the Buyer, shall have been delivered to and acknowledged
in writing by the Company’s Transfer Agent.
e. The
representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of Closing
Date, as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to
be performed, satisfied or complied with by the Company at or prior to the Closing Date.
f. No
litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
g. No
event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited
to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations.
h. Trading
in the Common Shares on the Principal Market shall not have been suspended by the SEC, FINRA or the Principal Market.
i. The
Company shall have delivered to the Buyer (i) a certificate evidencing the formation and good standing of the Company and each of its
Subsidiaries in such entity’s jurisdiction of formation issued by the Secretary of State (or comparable office) of such jurisdiction,
as of a date within ten (10) days of the Closing Date and (ii) resolutions adopted by the Company’s Board of Directors at a duly
called meeting or by unanimous written consent authorizing this Agreement and all other documents, instruments and transactions contemplated
hereby.
9. Governing
Law; Miscellaneous.
a. Governing
Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard
to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this
Agreement or any other agreement, certificate, instrument or document contemplated hereby shall be brought only in the state courts located
in the Court of Chancery of the State of Delaware or, to the extent such court does not have subject matter jurisdiction, the United States
District Court for the District of Delaware or, to the extent that neither of the foregoing courts has jurisdiction, the Superior Court
of the State of Delaware. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTIONS CONTEMPLATED HEREBY. The prevailing party shall
be entitled to recover from the other party its reasonable attorney’s fees and costs. Each party hereby irrevocably waives personal
service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement, the Note,
or any other agreement, certificate, instrument or document contemplated hereby or thereby 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 law.
b. Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute
one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party.
A facsimile or .pdf signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and
effect as if the signature were an original, not a facsimile or .pdf signature. Delivery of a counterpart signature hereto by facsimile
or email/.pdf transmission shall be deemed validly delivery thereof.
c. Construction;
Headings. This Agreement shall be deemed to be jointly drafted by the Company and the Buyer and shall not be construed against any
person as the drafter hereof. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect
the interpretation of, this Agreement.
d. Severability.
In the event that any provision of this Agreement, the Note, or any other agreement or instrument delivered in connection herewith is
invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove
invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Agreement, the Note,
or any other agreement, certificate, instrument or document contemplated hereby or thereby.
e. Entire
Agreement; Amendments. This Agreement, the Note, and the instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor
the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement or
any agreement or instrument contemplated hereby may be waived or amended other than by an instrument in writing signed by the Buyer.
f. Notices.
All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt
requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery,
telegram, e-mail or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand
delivery or delivery by e-mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address
or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Company, to:
1847 HOLDINGS LLC
590 Madison Avenue, 21st Floor
New York, NY 10022
Attention: Ellery Roberts
e-mail: info@1847holdings.com
If to the Buyer:
g. Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. The Company
shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Buyer. The Buyer may assign
its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private transaction from
the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.
h. Third
Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
i. Survival.
The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing
hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to indemnify and
hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to
any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any
of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.
j. Publicity.
The Company, and the Buyer shall have the right to review a reasonable period of time before issuance of any press releases, SEC, Principal
Market or FINRA filings, or any other public statements with respect to the transactions contemplated hereby; provided, however,
that the Company shall be entitled, without the prior approval of the Buyer, to make any press release or SEC, Principal Market (or other
applicable trading market) or FINRA filings with respect to such transactions as is required by applicable law and regulations (although
the Buyer shall be consulted by the Company in connection with any such press release prior to its release and shall be provided with
a copy thereof and be given an opportunity to comment thereon).
k. Further
Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
l. No
Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied against any party.
m. Indemnification.
In consideration of the Buyer’s execution and delivery of this Agreement and acquiring the Securities hereunder, and in addition
to all of the Company’s other obligations under this Agreement or the Note, the Company shall defend, protect, indemnify and hold
harmless the Buyer and its stockholders, partners, members, officers, directors, employees and direct or indirect investors and any of
the foregoing persons’ agents or other representatives (including, without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether
any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’
fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating
to (a) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement, the Note or any other
agreement, certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation
of the Company contained in this Agreement, the Note or any other agreement, certificate, instrument or document contemplated hereby or
thereby or (c) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes
a derivative action brought on behalf of the Company) and arising out of or resulting from (i) the execution, delivery, performance or
enforcement of this Agreement, the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby, (ii)
any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities,
or (iii) the status of the Buyer or holder of the Securities as an investor in the Company pursuant to the transactions contemplated by
this Agreement. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make
the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable law.
n. Remedies.
The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent
and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations
under this Agreement, the Note, the Warrant, or any other agreement, certificate, instrument or document contemplated hereby or thereby
will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, the Note,
the Warrant, or any other agreement, certificate, instrument or document contemplated hereby or thereby, that the Buyer shall be entitled,
in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of this Agreement, the Note, the Warrant, or any other agreement, certificate,
instrument or document contemplated hereby or thereby, and to enforce specifically the terms and provisions hereof and thereof, without
the necessity of showing economic loss and without any bond or other security being required.
o. Payment
Set Aside. To the extent that the (i) Company makes a payment or payments to the Buyer hereunder, pursuant to the Note, pursuant to
the Warrant, or pursuant to any other agreement, certificate, instrument or document contemplated hereby or thereby, or (ii) the Buyer
enforces or exercises its rights hereunder, pursuant to the Note, pursuant to the Warrant, or pursuant to any other agreement, certificate,
instrument or document contemplated hereby or thereby, and such payment or payments or the proceeds of such enforcement or exercise or
any part thereof (including but not limited to the sale of the Securities) are for any reason (i) subsequently invalidated, declared to
be fraudulent or preferential, set aside, recovered from, or disgorged by the Buyer, or (ii) are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver, government entity, or any other person or entity under any law (including, without limitation,
any bankruptcy law, foreign, state or federal law, common law or equitable cause of action), then (i) 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 and (ii) the Company shall immediately pay to the Buyer a dollar
amount equal to the amount that was for any reason (i) subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, or disgorged by the Buyer, or (ii) required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver,
government entity, or any other person or entity under any law (including, without limitation, any bankruptcy law, foreign, state or federal
law, common law or equitable cause of action).
p. Failure
or Indulgence Not Waiver. No failure or delay on the part of the Buyer in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privileges. All rights and remedies of the Buyer existing hereunder are cumulative to,
and not exclusive of, any rights or remedies otherwise available.
[Signature Page Follows]
IN WITNESS WHEREOF, the undersigned Buyer and the
Company have caused this Agreement to be duly executed as of the date first above written.
1847 HOLDINGS LLC |
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By: |
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Name: |
Ellery W. Roberts |
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Title: |
Chief Executive Officer |
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[_____________] |
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By: |
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Name: |
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Title: |
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SUBSCRIPTION AMOUNT:
Principal Amount of Note: $
Actual Amount of Purchase Price of Note: $
EXHIBIT A
FORM OF NOTE
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B)
AN OPINION OF COUNSEL (WHICH MAY BE THE LEGAL COUNSEL OPINION (AS DEFINED IN THE PURCHASE AGREEMENT)), IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A OR REGULATION S UNDER SAID ACT OR
OTHER APPLICABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Principal
Amount: $ |
Issue
Date: February ___, 2023 |
Actual
Amount of Purchase Price: $ |
|
PROMISSORY NOTE
FOR VALUE RECEIVED,
1847 HOLDINGS LLC, a Delaware limited liability company (hereinafter called the “Borrower” or the “Company”)
(Trading Symbol: EFSH), hereby promises to pay to the order of _____________, a __________, or registered assigns (the “Holder”),
in the form of lawful money of the United States of America, the principal sum of $___________, which amount is the $__________ actual
amount of the purchase price (the “Consideration”) hereof plus an original issue discount in the amount of $_________ (the
“OID”) (subject to adjustment herein) (the “Principal Amount”) and to pay interest on the unpaid Principal Amount
hereof at the rate of twelve percent (12%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”)
until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise, as further provided herein.
The maturity date shall be twelve (12) months from the Issue Date (the “Maturity Date”), and is the date upon which the Principal
Amount (which includes the OID) and any accrued and unpaid interest and other fees, shall be due and payable.
This Note may not be prepaid
or repaid in whole or in part except as otherwise explicitly set forth herein.
Any Principal Amount or interest
on this Note which is not paid when due shall bear interest at the rate of the lesser of (i) sixteen percent (16%) per annum and (ii)
the maximum amount permitted by law from the due date thereof until the same is paid (“Default Interest”). Interest and Default
Interest shall be computed on the basis of a 365-day year and the actual number of days elapsed.
All payments due hereunder
(to the extent not converted into common shares of the Borrower (the “Common Shares”) in accordance with the terms hereof)
shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter
give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by
the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is
a business day.
Each capitalized term used
herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement, dated as of
the Issue Date, pursuant to which this Note was originally issued (the “Purchase Agreement”). As used in this Note, the term
“business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York,
New York are authorized or required by law or executive order to remain closed. As used herein, the term “Trading Day” means
any day that Common Shares are listed for trading or quotation on the Principal Market (as defined in the Purchase Agreement), provided,
however, that if the Common Shares are not then listed or quoted on any Principal Market, then any calendar day.
This Note is free from all
taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar
rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
The following terms shall
also apply to this Note:
ARTICLE I. CONVERSION RIGHTS
1.1 Conversion Right.
The Holder shall have the right, on any calendar day, at any time on or following the date that an Event of Default (as defined in the
Note) occurs under the Note, to convert all or any portion of the then outstanding and unpaid Principal Amount and interest (including
any Default Interest) into fully paid and non-assessable Common Shares, as such Common Shares exist on the Issue Date, or any shares
of capital stock or other securities of the Borrower into which such Common Shares shall hereafter be changed or reclassified, at the
Conversion Price (as defined below) determined as provided herein (a “Conversion”)), by submitting to the Borrower a Notice
of Conversion (as defined in this Note) by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion
Date (as defined in this Note) prior to 11:59 p.m., New York, New York time; provided, however, that notwithstanding anything
to the contrary contained herein, the a Holder shall not have the right to convert any portion of this Note, pursuant to Section 1 or
otherwise, to the extent that after giving effect to such issuance after conversion as set forth on the applicable Notice of Conversion,
the Holder (together with the Holder’s affiliates (the “Affiliates”), and any other Persons (as defined below) 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 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 would be issuable
upon (i) conversion of the remaining, nonconverted portion 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 nonconverted portion of any other securities of the Company
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 1.1, 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 Holder is solely responsible for any schedules required to be filed in accordance therewith.
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 1.1, 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 two Trading Days 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 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 the Common
Shares outstanding at the time of the respective calculation hereunder. “Person” and “Persons” means an individual,
a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity
and any governmental entity or any department or agency thereof. The limitations contained in this paragraph shall apply to a successor
holder of this Note. The number of Conversion Shares to be issued upon each conversion of this Note shall be determined by dividing the
Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion,
in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower or Borrower’s
transfer agent by the Holder in accordance with the terms of this Note; provided that the Notice of Conversion is submitted by facsimile
or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower or Borrower’s transfer
agent before 11:59 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion
Amount” means, with respect to any conversion of this Note, the sum of (1) the Principal Amount of this Note to be converted in
such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such Principal Amount at the Interest
Rate to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the
immediately preceding clauses (1) and/or (2). In addition to the beneficial ownership limitations provided in this Note, the sum of the
number of Common Shares that may be issued under this Note shall be limited to the amount described in Section 5(r) of the Purchase Agreement,
unless the Shareholder Approval (as defined in the Purchase Agreement) is obtained by the Company. Notwithstanding anything in this Section
1.1 of this Note to the contrary, the Holder shall not be entitled to utilize a Conversion Price of less than $0.03 per share (the “Floor
Price”, subject to appropriate adjustment for any stock dividend, stock split, stock combination, rights offerings, reclassification
or similar transaction that proportionately decreases or increases the Common Stock). Further, beginning on the Issue Date and continuing
until the Note is fully converted or repaid in the entirety, the Company shall not issue Common Stock at a cost basis of less than the
Floor Price unless written consent of the Holder is obtained by the Company.
1.2 Conversion
Price. The per share conversion price into which Principal Amount and interest (including any Default Interest) under this Note shall
be convertible into Common Shares hereunder (the “Conversion Price”) shall equal the lower of (a) $4.20 (the “Fixed
Price”), and (b) 80% of the lowest VWAP on any Trading Day during the five (5) Trading Days prior to the respective Conversion Date.
“VWAP” means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal
Market during the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New York time, as reported by Quotestream or
other similar quotation service provider designated by the Holder. Holder shall be entitled to deduct $1,750.00 from the conversion amount
in each Notice of Conversion to cover Holder’s fees associated with each Notice of Conversion. All such Conversion Price determinations
are to be appropriately adjusted for any stock dividend, stock split, stock combination, rights offerings, reclassification or similar
transaction that proportionately decreases or increases the Common Shares. If the Company, at any time while this Note is outstanding:
(i) pays a stock dividend or otherwise makes a distribution or distributions payable in Common Shares on Common Shares or any Common Share
Equivalents (as defined in this Note), (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 the Common Shares, any shares 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 the immediately
preceding sentence 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. “Common Share Equivalents” means any securities of the Company or the Company’s subsidiaries which
would entitle the holder thereof to acquire at any time Common Shares, including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Shares.
1.3 Authorized
and Reserved Shares. The Borrower covenants that at all times until the Note is satisfied in full, the Borrower will reserve from
its authorized and unissued Common Shares a sufficient number of shares, free from preemptive rights, to provide for the issuance of a
number of Conversion Shares equal to the greater of: (a) _________ Common Shares or (b) the sum of (i) the number of Conversion Shares
issuable upon the full conversion of this Note (assuming no payment of Principal Amount or interest) at the time of such calculation (taking
into consideration any adjustments to the Conversion Price as provided in this Note) multiplied by (ii) 2.25 (the “Reserved Amount”).
The Borrower represents that upon issuance, the Conversion Shares will be duly and validly issued, fully paid and non-assessable. The
Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Conversion Shares or instructions
to have the Conversion Shares issued as contemplated by Section 1.4(e) hereof, and (ii) agrees that its issuance of this Note shall constitute
full authority to its officers and agents who are charged with the duty of executing stock certificates or cause the Company to electronically
issue Common Shares to execute and issue the necessary certificates for the Conversion Shares or cause the Conversion Shares to be issued
as contemplated by Section 1.4(e) hereof in accordance with the terms and conditions of this Note. If, at any time, the Borrower does
not maintain the Reserved Amount, it will be considered an Event of Default (as defined in this Note) under this Note.
1.4 Method
of Conversion.
(a) Surrender
of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with
the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid Principal
Amount is so converted. The Holder and the Borrower shall maintain records showing the Principal Amount so converted and the dates of
such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical
surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Holder shall, prima
facie, be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note
is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower,
whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder
(upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid Principal
Amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions
of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted Principal Amount of this Note represented
by this Note may be less than the amount stated on the face hereof.
(b) Payment
of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue
and delivery of Common Shares or other securities or property on conversion of this Note in a name other than that of the Holder (or in
street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until
the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account)
requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction
of the Borrower that such tax has been paid.
(c) Delivery
of Common Shares Upon Conversion. Upon receipt by the Borrower or Borrower’s transfer agent from the Holder of a facsimile transmission
or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in
this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates
for the Conversion Shares (or cause the electronic delivery of the Conversion Shares as contemplated by Section 1.4(e) hereof) within
two (2) Trading Days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid Principal
Amount and interest (including any Default Interest) under this Note, surrender of this Note). If the Company shall fail for any reason
or for no reason to issue to the Holder on or prior to the Deadline a certificate for the number of Conversion Shares or to which the
Holder is entitled hereunder and register such Conversion Shares on the Company’s share register or to credit the Holder’s
balance account with DTC (as defined below) for such number of Conversion Shares to which the Holder is entitled upon the Holder’s
conversion of this Note (a “Conversion Failure”), then, in addition to all other remedies available to the Holder, (i) the
Company shall pay in cash to the Holder on each day after the Deadline and during such Conversion Failure an amount equal to 1.0% of the
product of (A) the sum of the number of Conversion Shares not issued to the Holder on or prior to the Deadline and to which the Holder
is entitled and (B) the closing sale price of the Common Shares on the Trading Day immediately preceding the last possible date which
the Company could have issued such Conversion Shares to the Holder without violating this Section 1.4(c); and (ii) the Holder, upon written
notice to the Company, may void all or any portion of such Notice of Conversion; provided that the voiding of all or any portion of a
Notice of Conversion shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such
notice. In addition to the foregoing, if on or prior to the Deadline the Company shall fail to issue and deliver a certificate to the
Holder and register such Conversion Shares on the Company’s share register or credit the Holder’s balance account with DTC
for the number of Conversion Shares to which the Holder is entitled upon the Holder’s exercise hereunder or pursuant to the Company’s
obligation pursuant to clause (ii) below, and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise)
Common Shares to deliver in satisfaction of a sale by the Holder of Common Shares issuable upon such exercise that the Holder anticipated
receiving from the Company, then the Company shall, within two (2) Trading Days after the Holder’s request and in the Holder’s
discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions
and other reasonable and customary out-of-pocket expenses, if any) for the Common Shares so purchased (the “Buy-In Price”),
at which point the Company’s obligation to deliver such certificate (and to issue such Conversion Shares) or credit such Holder’s
balance account with DTC for such Conversion Shares shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Conversion Shares or credit such Holder’s balance account with DTC and pay cash to
the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of Common Shares, times (B)
the closing sales price of the Common Shares on the date of exercise. Nothing shall limit the 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 certificates representing the Conversion Shares (or to electronically
deliver such Conversion Shares) upon the conversion of this Note as required pursuant to the terms hereof.
(d) Obligation
of Borrower to Deliver Common Shares. At the time that the Holder submits the Notice of Conversion to the Borrower or Borrower’s
transfer agent, the Holder shall be deemed to be the holder of record of the Conversion Shares issuable upon such conversion, the outstanding
Principal Amount and the amount of accrued and unpaid interest (including any Default Interest) under this Note shall be reduced to reflect
such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of
this Note being so converted shall forthwith terminate except the right to receive the Common Shares or other securities, cash or other
assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s
obligation to issue and deliver the certificates for the Conversion Shares (or cause the electronic delivery of the Conversion Shares
as contemplated by Section 1.4(e) hereof) shall be absolute and unconditional, irrespective of the absence of any action by the Holder
to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any
action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or
any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the
Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection
with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of
Conversion is sent to the Borrower or Borrower’s transfer agent before 11:59 p.m., New York, New York time, on such date.
(e) Delivery
of Conversion Shares by Electronic Transfer. In lieu of delivering physical certificates representing the Conversion Shares issuable
upon conversion hereof, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities
Transfer or Deposit/Withdrawal at Custodian programs, upon request of the Holder and its compliance with the provisions contained in Section
1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Conversion
Shares issuable upon conversion hereof to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit
Withdrawal Agent Commission system.
1.5 Concerning
the Shares. The Conversion Shares issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are
sold pursuant to an effective registration statement under the 1933 Act or (ii) the Borrower or its transfer agent shall have been furnished
with an opinion of counsel (which opinion shall be the Legal Counsel Opinion (as defined in the Purchase Agreement)) to the effect that
the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are
sold or transferred pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption, or (iv) such shares are transferred
to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance
with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase
Agreement (and subject to the removal provisions set forth below), until such time as the Conversion Shares have been registered under
the 1933 Act or otherwise may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption without any restriction
as to the number of securities as of a particular date that can then be immediately sold, each certificate for the Conversion Shares that
has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement
or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:
“NEITHER THE ISSUANCE AND SALE
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR (B) AN OPINION OF COUNSEL (WHICH MAY BE THE LEGAL COUNSEL OPINION (AS DEFINED IN THE PURCHASE AGREEMENT)), IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A, REGULATION S UNDER SAID ACT,
OR OTHER APPLICABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
The legend set forth above
shall be removed and the Company shall issue to the Holder a certificate for the applicable Conversion Shares without such legend upon
which it is stamped or (as requested by the Holder) issue the applicable Conversion Shares by electronic delivery by crediting the account
of such holder’s broker with DTC, if, unless otherwise required by applicable state securities laws: (a) such Conversion Shares
are registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144,
Rule 144A, Regulation S, or other applicable exemption without any restriction as to the number of securities as of a particular date
that can then be immediately sold, or (b) the Company or the Holder provides the Legal Counsel Opinion (as contemplated by and in accordance
with Section 5(l) of the Purchase Agreement) to the effect that a public sale or transfer of such Conversion Shares may be made without
registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Company
shall be responsible for the fees of its transfer agent and all DTC fees associated with any such issuance. The Holder agrees to sell
all Conversion Shares, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable
prospectus delivery requirements, if any.
1.6 Effect
of Certain Events.
(a) Effect
of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the
assets of the Borrower, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined
below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default pursuant to which the Borrower
shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default
Amount (as defined in this Note) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual,
corporation, limited liability company, partnership, association, trust or other entity or organization.
(b) Adjustment
Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of this
Note, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result
of which Common Shares of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock
or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the
Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have
the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the
Common Shares immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled
to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations
on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of
the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion
Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable
in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not effectuate any transaction
described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, at least fifteen (15) days prior written notice
of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger,
consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder
shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument
the obligations of this Section 1.6(b). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers
or share exchanges.
(c) Purchase
Rights. If, at any time when all or any portion of this Note is issued and outstanding, the Borrower issues any convertible securities
or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders
of any class of Common Shares, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of Common Shares acquirable upon
complete conversion of this Note (without regard to any limitations on conversion contained herein) 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.
(d) Dilutive
Issuance. If the Borrower, at any time while this Note or any amounts due hereunder are outstanding, issues, sells or grants (or has
issued, sold or granted as of the Issue Date, as the case may be) any option to purchase, or sells or grants any right to reprice, or
otherwise disposes of, or issues (or has sold or issued, as the case may be, or announces any sale, grant or any option to purchase or
other disposition), any Common Shares or other securities convertible into, exercisable for, or otherwise entitle any person or entity
the right to acquire, Common Shares (including, without limitation, upon conversion of this Note, and any convertible notes or warrants
outstanding as of or following the Issue Date), in each or any case at an effective price per share that is lower than the then Conversion
Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”)
(it being agreed that if the holder of the Common Shares or other securities so issued shall at any time, whether by operation of purchase
price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights
per share which are issued in connection with such issuance, be entitled to receive Common Shares at an effective price per share that
is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of
the Dilutive Issuance), then the Conversion Price shall be reduced, at the option of the Holder, to a price equal to the Base Conversion
Price. Such adjustment shall be made whenever such Common Shares or other securities are issued. By way of example, and for the avoidance
of doubt, if the Company issues a convertible promissory note (including but not limited to a Variable Rate Transaction) (as defined in
the Purchase Agreement)), and the holder of such convertible promissory note has the right to convert it into Common Shares at an effective
price per share that is lower than the then Conversion Price (including but not limited to a conversion price with a discount that varies
with the trading prices of or quotations for the Common Shares), then the Holder has the right to reduce the Conversion Price to such
Base Conversion Price (including but not limited to a conversion price with a discount that varies with the trading prices of or quotations
for the Common Shares) in perpetuity regardless of whether the holder of such convertible promissory note ever effectuated a conversion
at the Base Conversion Price. In the event of an issuance of securities involving multiple tranches or closings, any adjustment pursuant
to this Section 1.6(d) shall be calculated as if all such securities were issued at the initial closing. Notwithstanding the foregoing,
this Section 1.6(d) shall not apply to the Excluded Transactions (as defined in this Note) unless an Event of Default has occurred under
Section 3.20 of this Note, provided, further, that if an Event of Default occurs under Section 3.20 of this Note then the Holder shall
at all times thereafter be entitled to utilize any Dilutive Issuance (including a Dilutive Issuance under any of the Excluded Transactions)
that has occurred or occurs on or after the Issue Date of this Note. “Excluded Transactions” means transactions involving
the issuance of the following securities of the Company: (i) Common Shares issued in a firm underwritten offering pursuant to a registration
statement filed by the Company, (ii) the issuance by the Company of Common Shares upon the exercise of an outstanding options or warrants
or the conversion of a security outstanding prior to the Issue Date so long as (a) such convertible or exercisable securities are disclosed
in the SEC Documents (as defined in the Purchase Agreement) prior to the Issue Date and (b) the conversion or exercise price in such securities
are not amended to a lower price on or after the Issue Date, (iii) 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, (iv) Common Shares, options or convertible securities issued to banks, equipment lessors
or other financial institutions, 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, (v) 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, (vi) 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, (vii) 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 equity incentive plan approved
by a majority of the disinterested directors of the Company, (viii) the issuance of securities pursuant to any other arrangements that
were in place prior to the Issue Date so long as (a) such arrangements are disclosed in the SEC Documents (as defined in the Purchase
Agreement) prior to the Issue Date and (b) the cost basis of such securities issued pursuant to such arrangements are not amended to a
lower cost basis on or after the Issue Date, or (ix) a Buyout Transaction (as defined below). “Buyout Transaction” shall mean
any transaction if the Note is fully repaid and extinguished within two (2) business days after the Company’s execution of the transaction
documents for the respective transaction.
(e) Notice
of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described
in Section 1.6 of this Note, the Borrower shall, at its expense and within two (2) calendar days after the occurrence of each respective
adjustment or readjustment of the Conversion Price, compute such adjustment or readjustment and prepare and furnish to the Holder a certificate
setting forth (i) the Conversion Price in effect at such time based upon the Dilutive Issuance, (ii) the number of Common Shares and the
amount, if any, of other securities or property which at the time would be received upon conversion of the Note, (iii) the detailed facts
upon which such adjustment or readjustment is based, and (iv) copies of the documentation (including but not limited to relevant transaction
documents) that evidences the adjustment or readjustment. In addition, the Borrower shall, within two (2) calendar days after each written
request from the Holder, furnish to such Holder a like certificate setting forth (i) the Conversion Price in effect at such time based
upon the Dilutive Issuance, (ii) the number of Common Shares and the amount, if any, of other securities or property which at the time
would be received upon conversion of the Note, (iii) the detailed facts upon which such adjustment or readjustment is based, and (iv)
copies of the documentation (including but not limited to relevant transaction documents) that evidences the adjustment or readjustment.
For the avoidance of doubt, each adjustment or readjustment of the Conversion Price as a result of the events described in Section 1.6
of this Note shall occur without any action by the Holder and regardless of whether the Borrower complied with the notification provisions
in Section 1.6 of this Note.
1.7 Status
as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the Conversion Shares covered thereby (other than the Conversion
Shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount
or Maximum Share Amount) shall be deemed converted into Common Shares and (ii) the Holder’s rights as a Holder of such converted
portion of this Note shall cease and terminate, excepting only the right to receive certificates for such Common Shares and to any remedies
provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms
of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all Common Shares prior to the tenth (10th)
business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless
the Holder otherwise elects to retain its status as a holder of Common Shares by so notifying the Borrower) the Holder shall regain the
rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable,
return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of
this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies for the Borrower’s failure
to convert this Note.
1.8 Prepayment.
At any time prior to the date that an Event of Default occurs under this Note, the Borrower shall have the right, exercisable on seven
(7) Trading Days prior written notice to the Holder of the Note, to prepay the outstanding Principal Amount and interest then due under
this Note in accordance with this Section 1.8. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall
be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay
the Note, and (2) the date of prepayment which shall be seven (7) Trading Days from the date of the Optional Prepayment Notice (the “Optional
Prepayment Date”). On the Optional Prepayment Date, the Borrower shall make payment of the amounts designated below to or upon the
order of the Holder as specified by the Holder in writing to the Borrower. If the Borrower exercises its right to prepay the Note in accordance
with this Section 1.8, the Borrower shall make payment to the Holder of an amount in cash equal to the sum of: (w) 100% multiplied by
the Principal Amount then outstanding plus (x) accrued and unpaid interest on the Principal Amount to the Optional Prepayment Date
plus (y) $750.00 to reimburse Holder for administrative fees. If the Borrower delivers an Optional Prepayment Notice and fails
to pay the applicable prepayment amount due to the Holder of the Note as provided in this Section 1.8, then the Borrower shall forever
forfeit its right to prepay any part of the Note pursuant to this Section 1.8.
1.9 Repayment
from Proceeds. If, at any time prior to the full repayment or full conversion of all amounts owed under this Note, the Company receives
cash proceeds from any source or series of related or unrelated sources, including but not limited to, the issuance of equity or debt,
the conversion of outstanding warrants of the Borrower, the issuance of securities pursuant to an Equity Line of Credit (as defined in
this Note) of the Borrower or the sale of assets outside of the ordinary course of business, the Borrower shall, within three (3) business
days of Borrower’s receipt of such proceeds, inform the February 2023 Buyers (as defined in the Purchase Agreement) (the “February
2023 Buyers”) of or publicly disclose such receipt, following which the Holder shall have the right in its sole discretion to require
the Borrower to immediately apply up to 50% of such proceeds (the “Repayment Percentage”) to repay all or any portion of the
outstanding Principal Amount and interest (including any Default Interest) then due under this Note, provided, however, that if any of
the other February 2023 Notes (as defined in the Purchase Agreement) (the “February 2023 Notes”) are outstanding at such time,
then the Repayment Percentage shall be allocated amongst the February 2023 Notes on a pro rata basis
in proportion to the aggregate principal amount of the February 2023 Notes then held by the February 2023 Buyers. In
the event that any of the February 2023 Buyers elects not to apply their pro rata portion of the respective Repayment Percentage towards
the repayment of their February 2023 Note, then such respective Repayment Percentage shall be allocated to the other February 2023 Buyers
on a pro rata basis in proportion to the aggregate principal amount of February 2023 Notes then held by each such other holder. Failure
of the Borrower to comply with this provision shall constitute an Event of Default. “Equity Line of Credit” shall mean any
transaction involving a written agreement between the Company and an investor or underwriter whereby the Company has the right to “put”
its Common Shares to the investor or underwriter over an agreed period of time and at an agreed price or price formula (such Common Shares
must be registered pursuant to a registration statement of the Company for the investor’s or underwriter’s resale). Notwithstanding
the foregoing, payments from customers shall be excluded from this Section 1.9.
ARTICLE II. RANKING AND CERTAIN COVENANTS
2.1 Ranking
and Security. This Note shall have priority over all unsecured indebtedness of the Borrower.
2.2 Other
Indebtedness. So long as the Borrower shall have any obligation under this Note, the Borrower shall not incur or suffer to exist or
guarantee any unsecured indebtedness that is senior to (in priority of payment and performance) the Borrower’s obligations hereunder.
2.3 Distributions
on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s
written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other
securities) on shares of capital stock other than previously announced planned regular quarterly dividends and dividends Common Shares
solely in the form of additional Common Shares or (b) directly or indirectly or through any subsidiary make any other payment or distribution
in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority
of the Borrower’s disinterested directors.
2.4 Restriction
on Stock Repurchases and Debt Repayments. So long as the Borrower shall have any obligation under this Note, the Borrower shall not
without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other
securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants,
rights or options to purchase or acquire any such shares, or repay any pari passu or subordinated indebtedness of Borrower.
2.5 Sale
of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written
consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent
by the Holder to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition. For the avoidance
of doubt, the Borrower is an acquisition holding company and the parties agree that the ordinary course of business of the Borrower includes
the acquisition and disposition of subsidiaries and material portions of the assets of subsidiaries.
2.6 Advances
and Loans; Affiliate Transactions. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without
the Holder’s written consent, lend money, give credit, make advances to or enter into any transaction with any person, firm, joint
venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except
loans, credits or advances (a) in existence or committed on the Issue Date and which the Borrower has informed Holder in writing prior
to the Issue Date or which are disclosed in the SEC Documents (as defined in the Purchase Agreement), (b) in regard to transactions with
unaffiliated third parties, made in the ordinary course of business or (c) in regard to transactions with unaffiliated third parties,
not in excess of $100,000. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s
written consent, repay any affiliate (as defined in Rule 144) of the Borrower in connection with any indebtedness or accrued amounts owed
to any such party.
2.7 Section
3(a)(10) Transaction. So long as this Note is outstanding, the Borrower shall not enter into any transaction or arrangement structured
in accordance with, based upon, or related or pursuant to, in whole or in part, Section 3(a)(10) of the Securities Act (a “3(a)(10)
Transaction”). In the event that the Borrower does enter into, or makes any issuance of Common Shares related to a 3(a)(10) Transaction
while this note is outstanding, a liquidated damages charge of 25% of the outstanding principal balance of this Note, but not less than
$25,000, will be assessed and will become immediately due and payable to the Holder at its election in the form of a cash payment or added
to the balance of this Note (under Holder's and Borrower's expectation that this amount will tack back to the Issue Date).
2.8 Preservation
of Business and Existence, etc. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without
the Holder’s written consent, (a) change the nature of its business; (b) sell, divest, change the structure of any material assets
other than in the ordinary course of business; (c) enter into a Variable Rate Transaction unless it is an Excluded Transaction (as defined
in the Note); or (d) enter into any merchant cash advance transactions. In addition, so long as the Borrower shall have any obligation
under this Note, the Borrower shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence,
rights and privileges, and become or remain, and cause each of its Subsidiaries (other than dormant Subsidiaries that have no or minimum
assets) to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or
leased by it or in which the transaction of its business makes such qualification necessary.
2.9 Noncircumvention.
The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate or Articles of Formation or Operating
Agreement, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, 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 Note, and
will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights
of the Holder.
2.10 Lost,
Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company
in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver
to the Holder a new Note.
ARTICLE III. EVENTS OF DEFAULT
It shall be considered an event of default if any
of the following events listed in this Article III (each, an “Event of Default”) shall occur:
3.1 Failure
to Pay Principal or Interest. The Borrower fails to pay, within two (2) business days following the due date thereof, the Principal
Amount hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise, or fails to fully comply
with Section 1.9 of this Note.
3.2 Conversion
and the Shares. The Borrower (i) fails to issue Conversion Shares to the Holder (or announces or threatens in writing that it will
not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of
this Note, (ii) fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate
for the Conversion Shares issuable to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note,
(iii) fails to reserve the Reserved Amount at all times, (iv) the Borrower directs its transfer agent not to transfer or delays, impairs,
and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for the Conversion
Shares issuable to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove
(or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend
(or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Holder upon
conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat
that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written
announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for two (2) Trading Days after the Holder
shall have delivered a Notice of Conversion, and/or (v) fails to remain current in its obligations to its transfer agent (including but
not limited to payment obligations to its transfer agent). It shall be an Event of Default of this Note, if a conversion of this Note
is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder
advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be added to the
principal balance of the Note.
3.3 Breach
of Agreements and Covenants. The Borrower breaches any covenant, agreement, or other term or condition contained in the Purchase Agreement,
this Note, Irrevocable Transfer Agent Instructions, Warrants (as defined in the Purchase Agreement) (the “Warrants”), or in
any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith and such failure shall
not have been remedied or waived within fifteen (15) calendar days after the earlier of (x) an officer of Borrower becomes aware of such
failure or (y) receipt by the Borrower of notice from the Holder of such failure.
3.4 Breach
of Representations and Warranties. Any representation or warranty of the Borrower made in the Purchase Agreement, this Note, Irrevocable
Transfer Agent Instructions, Warrants, or in any agreement, statement or certificate given in writing pursuant hereto or in connection
herewith or therewith shall be false or misleading in any material respect when made.
3.5 Receiver
or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or
consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or
trustee shall otherwise be appointed.
3.6 Judgments.
Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of
its property or other assets for more than $500,000, and shall remain unvacated, unbonded or unstayed for a period of sixty (60) days
unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.
3.7 Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any
bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.
3.8 Failure
to Comply with the 1934 Act. At any time after the Issue Date, the Borrower shall fail to comply with the reporting requirements of
the 1934 Act and/or the Borrower shall cease to be subject to the reporting requirements of the 1934 Act for ten consecutive trading days.
3.9 Liquidation.
Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
3.10 Cessation
of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such
debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern”
shall not be an admission that the Borrower cannot pay its debts as they become due.
3.11 Maintenance
of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets
which are necessary to conduct its business (whether now or in the future).
3.12 Financial
Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from
two years prior to the Issue Date of this Note and until this Note is no longer outstanding.
3.13 Replacement
of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to
the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant
to the Purchase Agreement (including but not limited to the provision to irrevocably reserve Common Shares in the Reserved Amount) signed
by the successor transfer agent to Borrower and the Borrower.
3.14 Cross-Default.
The declaration of an event of default by any lender or other extender of credit to the Company under any notes, loans, agreements or
other instruments of the Company evidencing any indebtedness of the Company (including those filed as exhibits to or described in the
Company’s filings with the SEC), after the passage of all applicable notice and cure or grace periods.
3.15 Variable
Rate Transactions. The Borrower consummates a Variable Rate Transaction at any time on or after the Issue Date other than a Variable
Rate Transaction that is an Excluded Transaction (as defined in the Note).
3.16 Inside
Information. Any attempt by the Borrower or its officers, directors, and/or affiliates to transmit, convey, disclose, or any actual
transmittal, conveyance, or disclosure by the Borrower or its officers, directors, and/or affiliates of, material non-public information
concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form
8-K pursuant to Regulation FD on that same date.
3.17 Unavailability
of Rule 144. If, at any time on or after the date that is six (6) calendar months after the Issue Date, the Holder is unable to (i)
obtain a standard “144 legal opinion letter” from an attorney reasonably acceptable to the Holder, the Holder’s brokerage
firm (and respective clearing firm), and the Borrower’s transfer agent in order to facilitate the Holder’s conversion of any
portion of the Note into free trading shares of the Borrower’s Common Shares pursuant to Rule 144, and/or (ii) thereupon deposit
such shares into the Holder’s brokerage account.
3.18 Delisting,
Suspension, or Quotation of Trading of Common Shares. If, at any time on or after the Issue Date, the Borrower’s Common Shares
(i) is suspended from trading, (ii) halted from trading, and/or (iii) fails to be quoted or listed (as applicable) on a Principal Market
for a period of ten consecutive trading days.
3.19 Market
Capitalization. The Borrower fails to maintain a market capitalization of at least $5,000,000 on any Trading Day, which shall be calculated
by multiplying (i) the closing price of the Borrower’s Common Shares on the Trading Day immediately preceding the respective date
of calculation by (ii) the total shares of the Borrower’s Common Shares issued and outstanding on the Trading Day immediately preceding
the respective date of calculation.
3.20 Failure
to Pay an Amortization Payment. The Borrower fails to pay an Amortization Payment (as defined in this Note) when due as provided in
Section 4.16 of this Note.
3.21 Shareholder
Approval. The Company fails to obtain the Shareholder Approval (as defined in the Purchase Agreement) within ninety (90) calendar
days after the Issue Date.
3.22 Rights
and Remedies Upon an Event of Default. Upon the occurrence of any Event of Default specified in this Article III, this Note shall
become immediately due and payable, and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount
equal to the Principal Amount then outstanding plus accrued interest (including any Default Interest) through the date of full repayment
multiplied by 115% (collectively the “Default Amount”), as well as all costs, including, without limitation, legal fees and
expenses, of collection, all without demand, presentment or notice, all of which hereby are expressly waived by the Borrower. Holder may,
in its sole discretion, determine to accept payment part in Common Shares and part in cash. For purposes of payments in Common Shares,
the conversion formula set forth in Section 1.2 shall apply as well as all other provisions of this Note. The Holder shall be entitled
to exercise all other rights and remedies available at law or in equity.
ARTICLE IV. MISCELLANEOUS
4.1 Failure
or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privileges. All rights and remedies of the Holder existing hereunder are cumulative to,
and not exclusive of, any rights or remedies otherwise available.
4.2 Notices.
All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt
requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery,
telegram, e-mail or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand
delivery or delivery by e-mail or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address
or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Borrower, to:
1847 HOLDINGS LLC
590 Madison Avenue, 21st Floor
New York, NY 10022
Attention: Ellery Roberts
e-mail: info@1847holdings.com
If to the Holder:
4.3 Amendments.
This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note”
and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended
or supplemented, then as so amended or supplemented.
4.4 Assignability.
This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors
and assigns. The Borrower shall not assign this Note or any rights or obligations hereunder without the prior written consent of the Holder.
The Holder may assign its rights hereunder to any “accredited investor” (as defined in Rule 501(a) of the 1933 Act) in a private
transaction from the Holder or to any of its “affiliates”, as that term is defined under the 1934 Act, without the consent
of the Borrower. Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona
fide margin account or other lending arrangement. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that
following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may
be less than the amount stated on the face hereof.
4.5 Cost
of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including
reasonable attorneys’ fees.
4.6 Governing
Law; Venue; Attorney’s Fees. This Note shall be governed by and construed in accordance with the laws of the State of Delaware
without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated
by this Note or any other agreement, certificate, instrument or document contemplated hereby shall be brought only in the state courts
located in the Court of Chancery of the State of Delaware or, to the extent such court does not have subject matter jurisdiction, the
United States District Court for the District of Delaware or, to the extent that neither of the foregoing courts has jurisdiction, the
Superior Court of the State of Delaware. The Borrower hereby irrevocably waives any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.
THE BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTIONS CONTEMPLATED HEREBY. Each party hereby irrevocably
waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note
or any other agreement, certificate, instrument or document contemplated hereby or thereby 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 law. The prevailing party in any action or dispute
brought in connection with this the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby shall
be entitled to recover from the other party its reasonable attorney’s fees and costs.
4.7 Certain
Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding Principal Amount (or
the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower
and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine
and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder
in part for loss of the opportunity to convert this Note and to earn a return from the sale of Common Shares acquired upon conversion
of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that
such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment
without the opportunity to convert this Note into Common Shares.
4.8 Purchase
Agreement. The Company and the Holder shall be bound by the applicable terms of the Purchase Agreement and the documents entered into
in connection herewith and therewith.
4.9 Notice
of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Shares
unless and only to the extent that it converts this Note into Common Shares. The Borrower shall provide the Holder with prior notification
of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the
event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive
payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger,
consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other
right, or for the purpose of determining shareholders who are entitled to vote in connection with any change in control or any proposed
liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior
to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier),
of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief
statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The
Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with
the notification to the Holder in accordance with the terms of this Section 4.9.
4.10 Remedies.
The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach
of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the
provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition
to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce
specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being
required.
4.11 Construction;
Headings. This Note shall be deemed to be jointly drafted by the Company and all the Holder and shall not be construed against any
person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation
of, this Note.
4.12 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 the Holder in order to enforce any right or remedy under
this Note. Notwithstanding any provision to the contrary contained in this Note, it is expressly agreed and provided that the total liability
of the Company under this Note for payments which under the applicable law are 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 which under the applicable law in the nature
of interest that the Company may be obligated to pay under this Note exceed such Maximum Rate. It is agreed that if the maximum contract
rate of interest allowed by applicable law and applicable to this Note is increased or decreased by statute or any official governmental
action subsequent to the Issue Date, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to this
Note 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 the Holder with respect to indebtedness evidenced by this Note, such
excess shall be applied by the Holder to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner
of handling such excess to be at the Holder’s election.
4.13 Severability.
In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law (including any judicial
ruling), then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to
conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision of this Note.
4.14 Terms
of Future Financings. So long as this Note is outstanding, upon any issuance by the Borrower or any of its subsidiaries of any security,
or amendment to a security that was originally issued before the Issue Date, with any term that the Holder reasonably believes is more
favorable to the holder of such security or with a term in favor of the holder of such security that the Holder reasonably believes was
not similarly provided to the Holder in this Note (even if the holder of such other security does not receive the benefit of such more
favorable term until a default occurs under such other security), then (i) the Borrower shall notify the Holder of such additional or
more favorable term within one (1) business day of the issuance and/or amendment (as applicable) of the respective security, and (ii)
such term, at Holder’s option, shall become a part of the transaction documents with the Holder (regardless of whether the Borrower
complied with the notification provision of this Section 4.14). The types of terms contained in another security that may be more favorable
to the holder of such security include, but are not limited to, terms addressing prepayment rate, interest rates, and original issue discounts.
Notwithstanding the foregoing, this Section 4.14 shall not apply to the Excluded Transactions unless an Event of Default has occurred
under Section 3.20 of this Note, provided, further, that if an Event of Default occurs under Section 3.20 of this Note then the Holder
shall at all times thereafter be entitled to enforce its rights under this Section 4.14 with respect to any of the Excluded Transactions
that has occurred or occurs on or after the Issue Date of this Note.
4.15 Dispute
Resolution. In the case of a dispute as to the determination of the Conversion Price, Conversion Amount, any prepayment amount or
Default Amount, Issue, Closing or Maturity Date, the closing bid price, or fair market value (as the case may be) or the arithmetic calculation
of the Conversion Price or the applicable prepayment amount(s) (as the case may be), the Borrower or the Holder shall submit the disputed
determinations or arithmetic calculations via facsimile (i) within one (1) Trading Day after receipt of the applicable notice giving rise
to such dispute to the Borrower or the Holder or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of
the circumstances giving rise to such dispute. If the Holder and the Borrower are unable to agree upon such determination or calculation
within one (1) Trading Day of such disputed determination or arithmetic calculation (as the case may be) being submitted to the Borrower
or the Holder, then the Borrower shall, within one (1) Trading Day, submit (a) the disputed determination of the Conversion Price, the
closing bid price, the or fair market value (as the case may be) to an independent, reputable investment bank selected by the Borrower
and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Price, Conversion Amount, any prepayment amount
or Default Amount, to an independent, outside accountant selected by the Holder that is reasonably acceptable to the Borrower. The Borrower
shall cause at its expense the investment bank or the accountant to perform the determinations or calculations and notify the Borrower
and the Holder of the results no later than one (1) Trading Day from the time it receives such disputed determinations or calculations.
Such investment bank’s or accountant’s determination or calculation shall be binding upon all parties absent demonstrable
error.
4.16 Amortization
Payments.
(a) In
addition to all other payment obligations under this Note, Borrower shall also make the following amortization payments (each an “Amortization
Payment”) in cash to the Holder towards the repayment of this Note, as provided in the following table:
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Payment Date: |
Payment Amount: |
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5/__/2023 |
$________ plus accrued interest through May __, 2023 (or, if, extended pursuant to Section 4.16(b) below, through June __, 2023) |
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6/__/2023 |
$________ plus accrued interest through June __, 2023 (or, if extended pursuant to Section 4.16(c) below, through July __, 2023) |
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7/__/2023 |
$________ plus accrued interest through July __, 2023 (or, if extended pursuant to Section 4.16(d) below, through August __, 2023) |
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8/__/2023 |
$________ plus accrued interest through August __, 2023 |
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9/__/2023 |
$________ plus accrued interest through September __, 2023 |
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10/__/2023 |
$________ plus accrued interest through October __, 2023 |
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11/__/2023 |
$________ plus accrued interest through November __, 2023 |
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12/__/2023 |
$________ plus accrued interest through December __, 2023 |
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1/__/2024 |
$________ plus accrued interest through January __, 2024 |
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2/__/2024 |
$________ plus accrued interest through February __, 2024 |
(b) With
respect to the first Amortization Payment originally due on May __, 2023 (the “First Amortization Payment”), the Company may
notify the Holder on or before May __, 2023, that the Company is electing to extend the due date of the First Amortization Payment to
June __, 2023 (the “First Amortization Payment Extension”) as further provided herein. If the Company exercises the First
Amortization Payment Extension, then the First Amortization Payment shall be due on June __, 2023, and the Company shall pay $________
plus 10% of the accrued interest through May __, 2023 (the “First Amortization Payment Extension Fee”) to the Holder on or
before May __, 2023. For the avoidance of doubt, the First Amortization Payment Extension shall not affect the due date of any other Amortization
Payment and the First Amortization Payment Extension Fee shall not reduce the amounts owed under the Note. The Company shall not be permitted
to exercise the First Amortization Payment Extension if an Event of Default occurs under the Note.
(c) With
respect to the second Amortization Payment originally due on June __, 2023 (the “Second Amortization Payment”), the Company
may notify the Holder on or before June __, 2023, that the Company is electing to extend the due date of the Second Amortization Payment
to July __, 2023 (the “Second Amortization Payment Extension”) as further provided herein. If the Company exercises the Second
Amortization Payment Extension, then the Second Amortization Payment shall be due on July __, 2023, and the Company shall pay $________
plus 10% of the accrued interest through June __, 2023 (the “Second Amortization Payment Extension Fee”) to the Holder on
or before June __, 2023. For the avoidance of doubt, the Second Amortization Payment Extension shall not affect the due date of any other
Amortization Payment and the Second Amortization Payment Extension Fee shall not reduce the amounts owed under the Note. The Company shall
not be permitted to exercise the Second Amortization Payment Extension if an Event of Default occurs under the Note.
(d) With
respect to the third Amortization Payment originally due on July __, 2023 (the “Third Amortization Payment”), the Company
may notify the Holder on or before July __, 2023, that the Company is electing to extend the due date of the Third Amortization Payment
to August __, 2023 (the “Third Amortization Payment Extension”) as further provided herein. If the Company exercises the Third
Amortization Payment Extension, then the Third Amortization Payment shall be due on August __, 2023, and the Company shall pay $________
plus 10% of the accrued interest through July __, 2023 (the “Third Amortization Payment Extension Fee”) to the Holder on or
before July __, 2023. For the avoidance of doubt, the Third Amortization Payment Extension shall not affect the due date of any other
Amortization Payment and the Third Amortization Payment Extension Fee shall not reduce the amounts owed under the Note. The Company shall
not be permitted to exercise the Third Amortization Payment Extension if an Event of Default occurs under the Note.
IN WITNESS WHEREOF,
Borrower has caused this Note to be signed in its name by its duly authorized officer on February __, 2023.
1847 HOLDINGS LLC |
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By: |
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Name: |
Ellery W. Roberts |
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Title: |
Chief Executive Officer |
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EXHIBIT A – NOTICE OF
CONVERSION
The undersigned hereby elects
to convert $_________ principal amount of the Note (defined below) into that number of Common Shares to be issued pursuant to the conversion
of the Note (“Common Shares”) as set forth below, of 1847 HOLDINGS LLC, a Delaware limited liability company (the “Borrower”),
according to the conditions of the promissory note of the Borrower dated as of February __9, 2023 (the “Note”), as of the
date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.
Box Checked as to applicable
instructions:
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☐ |
The Borrower shall electronically transmit the Common Shares issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”). |
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Name of DTC Prime Broker: |
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DTC Participant Number: |
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Account Number: |
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Account Name: |
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☐ |
The undersigned hereby requests that
the Borrower issue a certificate or certificates for the number of Common Shares set forth below (which numbers are based on the Holder’s
calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:
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Date of Conversion: |
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Applicable Conversion Price: |
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Number of Common Shares to be Issued Pursuant to Conversion of the Note: |
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Amount of Principal Balance Due remaining Under the Note after this conversion: |
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EXHIBIT B
PIGGY-BACK REGISTRATION RIGHTS
All of the Conversion Shares,
Exercise Shares, and Commitment Shares shall be deemed “Registrable Securities” subject to the provisions of this Exhibit
B. All capitalized terms used but not defined in this Exhibit B shall have the meanings ascribed to such terms in the Securities Purchase
Agreement to which this Exhibit is attached.
| 1. | Piggy-Back Registration. |
1.1 If
at any time on or after the date of the Closing the Company proposes to file any Registration Statement under the 1933 Act (a “Registration
Statement”) with respect to any offering of equity securities, or securities or other obligations exercisable or exchangeable for,
or convertible into, equity securities, by the Company for its own account or for shareholders of the Company for their account (or by
the Company and by shareholders of the Company), other than a Registration Statement (i) filed in connection with any employee stock option
or other benefit plan on Form S-8, (ii) for a dividend reinvestment plan, (iii) in connection with a merger or acquisition, or (iv) filed
solely for a firm underwritten offering of its Common Shares, then the Company shall (x) give written notice of such proposed filing to
the holders of Registrable Securities appearing on the books and records of the Company as such a holder as soon as practicable but in
no event less than ten (10) days before the anticipated filing date of the Registration Statement, which notice shall describe the amount
and type of securities to be included in such Registration Statement, the intended method(s) of distribution, and the name of the proposed
managing underwriter or underwriters, if any, of the offering, and (y) offer to the holders of Registrable Securities in such notice the
opportunity to register the sale of such number of Registrable Securities as such holders may request in writing within three (3) days
following receipt of such notice (a “Piggy-Back Registration”). The Company shall cause such Registrable Securities to be
included in such registration and shall cause the managing underwriter or underwriters of a proposed underwritten offering to permit the
Registrable Securities requested to be included in a Piggy-Back Registration on the same terms and conditions as any similar securities
of the Company and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of
distribution thereof (with the understanding that the Company shall file the initial prospectus covering the Buyer’s sale of the
Registrable Securities at prevailing market prices within two business days of the date that the Registration Statement is declared effective
by the SEC).
1.2 Any
holder of Registrable Securities may elect to withdraw such holder’s request for inclusion of Registrable Securities in any Piggy-Back
Registration by giving written notice to the Company of such request to withdraw prior to the effectiveness of the Registration Statement.
The Company (whether on its own determination or as the result of a withdrawal by persons making a demand pursuant to written contractual
obligations) may withdraw a Registration Statement at any time prior to the effectiveness of such Registration Statement. Notwithstanding
any such withdrawal, the Company shall pay all expenses incurred by the holders of Registrable Securities in connection with such Piggy-Back
Registration as provided in Section 1.5 below.
1.3 The
Company shall notify the holders of Registrable Securities at any time when a prospectus relating to such holder’s Registrable Securities
is required to be delivered under the 1933 Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing.
At the request of such holder, the Company shall also prepare, file and furnish to such holder a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of the Registrable Securities,
such prospectus shall not include 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 not misleading in light of the circumstances then existing. The holders of Registrable Securities
shall not to offer or sell any Registrable Securities covered by the Registration Statement after receipt of such notification until the
receipt of such supplement or amendment.
1.4 The
Company may request a holder of Registrable Securities to furnish the Company such information with respect to such holder and such holder’s
proposed distribution of the Registrable Securities pursuant to the Registration Statement and to complete such selling stockholder or
similar questionnaire as is customary as the Company may from time to time reasonably request in writing or as shall be required by law
or by the SEC in connection therewith, and such holders shall promptly furnish the Company with such information as a condition to the
inclusion of the Registrable Securities in the Registration Statement.
1.5 All
fees and expenses incident to the performance of or compliance with this Exhibit B 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 SEC, (B) with respect to filings required
to be made with any trading market on which the Common Shares are then listed for trading, (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) and (D) with respect to any filing
that may be required to be made by any broker through which a holder of Registrable Securities intends to make sales of Registrable Securities
with the FINRA, (ii) printing expenses, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company, (v) 1933 Act liability insurance, if the Company so desires such insurance, (vi) fees and expenses of all other persons or entities
retained by the Company in connection with the consummation of the transactions contemplated by this Exhibit B and (vii) reasonable fees
and disbursements of a single special counsel for the holders of Registrable Securities (selected by holders of the majority of the Registrable
Securities requesting such registration). 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 of Registrable Securities.
1.6 The
Company and its successors and assigns shall indemnify and hold harmless the Buyer, each holder of Registrable Securities, the officers,
directors, members, partners, agents and employees (and any other individuals or entities 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 individual or entity who controls
the Buyer or any such holder of Registrable Securities (within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act)
and the officers, directors, members, stockholders, partners, agents and employees (and any other individuals or entities 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 individual
or entity (each, an “Indemnified Party”), 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 related 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 such 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 1933 Act, the 1934 Act or any
state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Exhibit B,
except to the extent, but only to the extent, that (i) such untrue statements or omissions are based upon information regarding the Buyer
or such holder of Registrable Securities furnished to the Company by such party for use therein. The Company shall notify the Buyer and
each holder of Registrable Securities promptly of the institution, threat or assertion of any proceeding arising from or in connection
with the transactions contemplated by this Exhibit B of which the Company is aware. The Buyer shall indemnify the Company and its similar
indemnified parties to the same extent that the Company is required to indemnify the Buyer hereunder but only to the extent, that Losses
arise from untrue statements or omissions are based upon information regarding the Buyer or such holder of Registrable Securities furnished
to the Company by such party for use therein.
1.7 If
the indemnification under Section 1.6 is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for
any Losses, then the Company 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 Company 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 the Company 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, the
Company or the 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
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 Section 1.6 was available to such party
in accordance with its terms. It is agreed that it would not be just and equitable if contribution pursuant to this Section 1.7 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 sentence. Notwithstanding the provisions of this Section 1.7, neither the Buyer nor any holder of Registrable
Securities shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received
by such party from the sale of all of their Registrable Securities pursuant to such Registration Statement or related prospectus exceeds
the amount of any damages that such party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission.
[End of Exhibit B]
NEITHER THIS SECURITY NOR THE SECURITIES AS TO
WHICH THIS SECURITY MAY BE EXERCISED HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON SHARE PURCHASE WARRANT
1847 HOLDINGS LLC
Warrant Shares: ___________
Date of Issuance: February ___, 2023 (“Issuance
Date”)
This COMMON SHARE PURCHASE
WARRANT (the “Warrant”) certifies that, for value received (in connection with the issuance of the promissory note
in the principal amount of $_________ to the Holder (as defined below) of even date) (the “Note”), ___________, a ______________
(including any permitted and registered 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 of issuance hereof, to purchase from 1847 HOLDINGS
LLC, a Delaware limited liability company (the “Company”), _________ Common Shares (the “Warrant Shares”)
(whereby such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant) at the Exercise Price per
share then in effect. This Warrant is issued by the Company as of the date hereof in connection with that certain securities purchase
agreement dated February __, 2023, by and among the Company and the Holder (the “Purchase Agreement”).
Capitalized terms used in
this Warrant shall have the meanings set forth in the Purchase Agreement unless otherwise defined in the body of this Warrant or in Section
12 below. For purposes of this Warrant, the term “Exercise Price” shall mean $4.20, subject to adjustment as provided
herein (including but not limited to cashless exercise), and the term “Exercise Period” shall mean the period commencing
on the Issuance Date and ending on 5:00 p.m. eastern standard time on the five-year anniversary thereof.
(a) Mechanics
of Exercise. Subject to the terms and conditions hereof, the rights represented by this Warrant may be exercised in whole or in part
at any time or times during the Exercise Period by delivery of a written notice, in the form attached hereto as Exhibit A (the
“Exercise Notice”), of the Holder’s election to exercise this Warrant. The Holder shall not be required to deliver
the original Warrant in order to effect an exercise hereunder. 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. On or before the second Trading Day (the “Warrant
Share Delivery Date”) following the date on which the Holder sent the Exercise Notice to the Company or the Company’s
transfer agent, and upon receipt by the Company of payment to the Company of an amount equal to the applicable Exercise Price multiplied
by the number of Warrant Shares as to which all or a portion of this Warrant is being exercised (the “Aggregate Exercise Price”
and together with the Exercise Notice, the “Exercise Delivery Documents”) in cash or by wire transfer of immediately
available funds (or by cashless exercise, in which case there shall be no Aggregate Exercise Price provided), the Company shall (or direct
its transfer agent to) issue and deliver by overnight courier to the address as specified in the Exercise Notice, a certificate, registered
in the Company’s share register in the name of the Holder or its designee, for the number of Common Shares to which the Holder is
entitled pursuant to such exercise (or deliver such Common Shares in electronic format if requested by the Holder). Upon delivery of the
Exercise Delivery Documents, 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 certificates evidencing such
Warrant Shares. If this Warrant is submitted in connection with any exercise and the number of Warrant Shares represented by this Warrant
submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as
practicable and in no event later than three business days after any exercise and at its own expense, issue a new Warrant (in accordance
with Section 6) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.
If the Company fails to cause
its transfer agent to issue to the Holder the respective Common Shares by the respective Warrant Share Delivery Date, then the Holder
will have the right to rescind such exercise in Holder’s sole discretion in addition to all other rights and remedies at law, under
this Warrant, or otherwise, and such failure shall also be deemed a material breach under this Warrant, and a material breach under the
Purchase Agreement.
If the Market Price of one
Common Share is greater than the Exercise Price, then the Holder may elect to receive Warrant Shares pursuant to a cashless exercise,
in lieu of a cash exercise, equal to the value of this Warrant determined in the manner described below (or of any portion thereof remaining
unexercised) by surrender of this Warrant and an Exercise Notice, in which event the Company shall issue to Holder a number of Common
Shares computed using the following formula:
X = Y (A-B)
A
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X = |
the number of Shares to be issued to Holder. |
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Y = |
the number of Warrant Shares that the Holder elects to purchase under this Warrant (at the date of such calculation). |
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the Market Price (at the date of such calculation). |
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Exercise Price (as adjusted to the date of such calculation). |
(b) No
Fractional Shares. No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant
hereto. All Warrant Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining
whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance
of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction
a sum in cash equal to the product resulting from multiplying the then-current fair market value of a Warrant Share by such fraction.
(c) Holder’s
Exercise Limitations. Notwithstanding anything to the contrary contained herein, 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 1 or otherwise, to the extent
that after giving effect to such issuance after exercise as set forth on the applicable Exercise Notice, the Holder (together with the
Holder’s affiliates (the “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 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,
nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise
or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other
Common 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 1(c), 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 Holder is solely responsible for any schedules required to be filed
in accordance therewith. 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 1(c), 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 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 two Trading Days 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 at the time of the respective calculation hereunder. In addition to the beneficial
ownership limitations provided in this Warrant, the sum of the number of Common Shares that may be issued under this Warrant shall be
limited to the amount described in Section 4(r) of the Purchase Agreement, unless the Shareholder Approval (as defined in the Purchase
Agreement) is obtained by the Company. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
(d) 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 Company’s transfer agent to transmit to the Holder the Warrant Shares in accordance with the provisions
of this Warrant (including but not limited to Section 1(a) above pursuant to an exercise on or before the respective 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, within
one (1) business day of Holder’s request, 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 product of (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 within one (1) business day of Holder’s request 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, or effectuates a cashless
exercise hereunder for, Common Shares having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise
of 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 Common
Shares upon exercise of the Warrant as required pursuant to the terms hereof.
2. ADJUSTMENTS.
The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:
(a) Distribution
of Assets. 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 or other similar transaction)
(a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Exercise Price in
effect immediately prior to the close of business on the record date fixed for the determination of holders of Common Shares entitled
to receive the Distribution shall be reduced, effective as of the close of business on the payment date for such Distribution, to a price
determined by multiplying such Exercise Price by a fraction (i) the numerator of which shall be the Closing Sale Price of the Common Shares
on the Trading Day immediately preceding the record date for such Distribution minus the value of the Distribution (as determined in good
faith by the Company’s Board of Directors) applicable to one Common Share, and (ii) the denominator of which shall be the Closing
Sale Price of the Common Shares on the Trading Day immediately preceding such record date.
(b) Anti-Dilution
Adjustments to Exercise Price. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding,
shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer,
sale, grant or any option to purchase or other disposition) any Common Shares or securities (including but not limited to Common Share
Equivalents) entitling any person or entity (for purposes of clarification, including but not limited to the Holder pursuant to (i) any
other security of the Company currently held by Holder, (ii) any other security of the Company issued to Holder on or after the Issuance
Date (including but not limited to the Note), or (iii) any other agreement entered into between the Company and Holder) to acquire Common
Shares (upon conversion, exercise or otherwise), at an effective price per share less than the then Exercise Price (such lower price,
the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of
the Common Shares or Common Share Equivalents so issued shall at any time, whether by operation of purchase price adjustments, elimination
of an applicable floor price for any reason in the future (including but not limited to the passage of time or satisfaction of certain
condition(s)), reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights
per share which are issued in connection with such issuance, be entitled or potentially entitled to receive Common Shares at an effective
price per share which is less than the Exercise Price at any time while such Common Shares or Common Share Equivalents are in existence,
such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance (regardless of whether
the Common Shares or Common Share Equivalents are (i) subsequently redeemed or retired by the Company after the date of the Dilutive Issuance
or (ii) actually converted or exercised at such Base Share Price), then the Exercise Price shall be reduced at the option of the Holder
and only reduced to equal the Base Share Price. Such adjustment shall be made whenever such Common Shares or Common Share Equivalents
(as defined in the Note) are issued, regardless of whether the Common Shares or Common Share Equivalents are (i) subsequently redeemed
or retired by the Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price by
the holder thereof (for the avoidance of doubt, the Holder may utilize the Base Share Price even if the Company did not actually issue
Common Shares at the Base Share Price under the respective Common Share Equivalents). The Company shall notify the Holder in writing,
no later than the Trading Day following the issuance of any Common Shares or Common Share Equivalents subject to this Section 2(b), indicating
therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice
the “Dilutive Issuance Notice”). For purposes of clarification, regardless of whether (i) the Company provides a Dilutive
Issuance Notice pursuant to this Section 2(b) upon the occurrence of any Dilutive Issuance or (ii) the Holder accurately refers to the
Base Share Price in the Exercise Notice, the Holder is entitled to receive the Base Share Price at all times on and after the date of
such Dilutive Issuance. Notwithstanding the foregoing, this Section 2(b) shall not apply to the Excluded Transactions (as defined in the
Note) unless an Event of Default has occurred under Section 3.20 of the Note, provided, further, that if an Event of Default occurs under
Section 3.20 of the Note then the Holder shall at all times thereafter be entitled to utilize any Dilutive Issuance (including a Dilutive
Issuance under any of the Excluded Transactions) that has occurred or occurs on or after the Issuance Date of this Warrant. Notwithstanding
anything in this Section 2(b) of this Warrant to the contrary, the Holder shall not be entitled to utilize a Base Share Price of less
than $0.03 per share (the “Floor Price”, subject to appropriate adjustment for any stock dividend, stock split, stock combination,
rights offerings, reclassification or similar transaction that proportionately decreases or increases the Common Stock), unless and until
the Company obtains the Shareholder Approval (as defined in the Purchase Agreement). Further, beginning on the Issue Date and continuing
until the Warrant is fully exercised, the Company shall not issue Common Stock at a cost basis of less than the Floor Price unless written
consent of the Holder is obtained by the Company.
(c) Subdivision
or Combination of Common Shares. If the Company at any time on or after the Issuance Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding Common Shares into a greater number of shares, the Exercise Price
in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately
increased. If the Company at any time on or after the Issuance Date combines (by combination, reverse stock split or otherwise) one or
more classes of its outstanding Common Shares into a smaller number of shares, the Exercise Price in effect immediately prior to such
combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased. Any adjustment under
this Section 2(c) shall become effective at the close of business on the date the subdivision or combination becomes effective. Each such
adjustment of the Exercise Price shall be calculated to the nearest one-hundredth of a cent. Such adjustment shall be made successively
whenever any event covered by this Section 2(c) shall occur.
3. FUNDAMENTAL
TRANSACTIONS. If, at any time while this Warrant is outstanding, (i) the Company effects any merger of the Company with or into another
entity and the Company is not the surviving entity (such surviving entity, the “Successor Entity”), (ii) the Company
effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange
offer (whether by the Company or by another individual or entity, and approved by the Company) is completed pursuant to which holders
of Common Shares are permitted to tender or exchange their Common Shares for other securities, cash or property and the holders of at
least 50% of the Common Shares accept such offer, or (iv) the Company effects any reclassification 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
(other than as a result of a subdivision or combination of Common Shares) (in any such case, a “Fundamental Transaction”),
then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive the number of Common Shares of the Successor
Entity or of the Company and any additional consideration (the “Alternate Consideration”) receivable upon or as a result
of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of Common Shares for
which this Warrant is exercisable immediately prior to such event (disregarding any limitation on exercise contained herein solely for
the purpose of such determination). 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. To the
extent necessary to effectuate the foregoing provisions, any Successor Entity in such Fundamental Transaction shall issue to the Holder
a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate
Consideration.
4. NON-CIRCUMVENTION.
The Company covenants and agrees that it will not, by amendment of its certificate of formation, operating agreement or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement, 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, and will at all times in good faith carry out
all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality
of the foregoing, the Company (i) shall not increase the par value of any Common Shares receivable upon the exercise of this Warrant above
the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and non-assessable Common Shares upon the exercise of this Warrant, and (iii) shall, for so long as this
Warrant is outstanding, have authorized and reserved, free from preemptive rights, 2.25 times the number of Common Shares into which the
Warrants are then exercisable into to provide for the exercise of the rights represented by this Warrant (without regard to any limitations
on exercise).
5. WARRANT
HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise specifically provided herein, this Warrant, in and of itself, shall not entitle
the Holder to any voting rights or other rights as a shareholder of the Company. In addition, nothing contained in this Warrant shall
be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a
shareholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
6. REISSUANCE.
(a) Lost,
Stolen or Mutilated Warrant. If this Warrant is lost, stolen, mutilated or destroyed, the Company will, on such terms as to indemnity
or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new
Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed.
(b) Issuance
of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant shall
be of like tenor with this Warrant, and shall have an issuance date, as indicated on the face of such new Warrant which is the same as
the Issuance Date.
7. TRANSFER.
This Warrant shall be binding upon the Company and its successors and assigns, and shall inure to be the benefit of the Holder and its
successors and assigns. Notwithstanding anything to the contrary herein, the rights, interests or obligations of the Company hereunder
may not be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior signed written consent of
the Holder, which consent may be withheld at the sole discretion of the Holder (any such assignment or transfer shall be null and void
if the Company does not obtain the prior signed written consent of the Holder). This Warrant or any of the severable rights and obligations
inuring to the benefit of or to be performed by Holder hereunder may be assigned by Holder to a third party, in whole or in part, without
the need to obtain the Company’s consent thereto.
8. NOTICES.
Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance
with the notice provisions contained in the Purchase Agreement. The Company shall provide the Holder with prompt written notice (i) immediately
upon any adjustment of the Exercise Price, setting forth in reasonable detail, the calculation of such adjustment and (ii) at least 20
days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the
Common Shares, (B) with respect to any grants, issuances or sales of any stock or other securities directly or indirectly convertible
into or exercisable or exchangeable for Common Shares or other property, pro rata to the holders of Common Shares or (C) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall
be made known to the public prior to or in conjunction with such notice being provided to the Holder.
9. 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.
10. GOVERNING
LAW AND VENUE. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware without regard
to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this
Warrant or any other agreement, certificate, instrument or document contemplated hereby shall be brought only in the state courts located
in the Court of Chancery of the State of Delaware or, to the extent such court does not have subject matter jurisdiction, the United States
District Court for the District of Delaware or, to the extent that neither of the foregoing courts has jurisdiction, the Superior Court
of the State of Delaware. The parties to this Warrant hereby irrevocably waive any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR UNDER ANY OTHER TRANSACTION DOCUMENT ENTERED INTO IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED
HEREBY OR THEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs.
In the event that any provision of this Warrant or any other agreement delivered in connection herewith is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives
personal service of process and consents to process being served in any suit, action or proceeding in connection with this Warrant or
any other transaction document entered into in connection with this Warrant 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 the Purchase 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 law.
11. ACCEPTANCE.
Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.
12. CERTAIN
DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:
(a) “Closing
Sale Price” means, for any security as of any date, (i) the last closing trade price for such security on the Principal Market,
as reported by Quotestream or other similar quotation service provider designated by the Holder, or, if the Principal Market begins to
operate on an extended hours basis and does not designate the closing trade price, then the last trade price of such security prior to
4:00 p.m., New York time, as reported by Quotestream or other similar quotation service provider designated by the Holder, or (ii) if
the foregoing does not apply, the last trade price of such security in the over-the-counter market for such security as reported by Quotestream
or other similar quotation service provider designated by the Holder, or (iii) if no last trade price is reported for such security by
Quotestream or other similar quotation service provider designated by the Holder, the average of the bid and ask prices of any market
makers for such security as reported by Quotestream or other similar quotation service provider designated by the Holder. If the Closing
Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security
on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations to be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.
(b) “Common
Shares” means the Company’s common shares, and any other class of securities into which such securities may hereafter
be reclassified or changed.
(c) “Common
Share Equivalents” means any securities of the Company that would entitle the holder thereof to acquire at any time Common Shares,
including without limitation any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Shares.
(d) “Person”
and “Persons” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust,
an unincorporated organization, any other entity and any governmental entity or any department or agency thereof.
(e) “Principal
Market” means the principal securities exchange or trading market where such Common Shares are listed or quoted, including but
not limited to any tier of the OTC Markets, any tier of the NASDAQ Stock Market (including NASDAQ Capital Market), or the NYSE American,
or any successor to such markets.
(f) “Market
Price” means the highest traded price of the Common Shares during the thirty Trading Days prior to the date of the respective
Exercise Notice.
(g) “Trading
Day” means any day on which the Common Shares are listed or quoted on its Principal Market, provided, however, that if the Common
Shares are not then listed or quoted on any Principal Market, then any calendar day.
* * * * * * *
IN WITNESS WHEREOF, the Company has caused this
Warrant to be duly executed as of the Issuance Date set forth above.
|
1847 HOLDINGS LLC |
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By: |
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Name: |
Ellery Roberts |
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Title: |
Chief Executive Officer |
EXHIBIT A
EXERCISE NOTICE
(To be executed by the registered holder
to exercise this Common Share Purchase Warrant)
THE UNDERSIGNED holder hereby
exercises the right to purchase _____________ of the Common Shares (“Warrant Shares”) of 1847 HOLDINGS LLC, a Delaware limited
liability company (the “Company”), evidenced by the attached copy of the Common Share Purchase Warrant (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
| 1. | Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as
(check one): |
| ☐ | a cash exercise with respect to Warrant Shares; or |
| ☐ | by cashless exercise pursuant to the Warrant. |
| 2. | Payment of Exercise Price. If cash exercise is selected above, the holder shall pay the applicable
Aggregate Exercise Price in the sum of $ to the Company in accordance with the terms of the Warrant. |
| 3. | Delivery of Warrant Shares. The Company shall deliver to the holder Warrant Shares in
accordance with the terms of the Warrant. |
Date:
|
|
|
(Print Name of Registered Holder) |
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By: |
|
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Name: |
|
Title: |
EXHIBIT B
ASSIGNMENT OF WARRANT
(To be signed only upon authorized transfer
of the Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns, and transfers unto _________________________________ the right to purchase ____________ common shares of 1847 HOLDINGS LLC, to
which the within Common Share Purchase Warrant relates and appoints ___________________________, as attorney-in-fact, to transfer said
right on the books of 1847 HOLDINGS LLC with full power of substitution and re-substitution in the premises. By accepting such transfer,
the transferee has agreed to be bound in all respects by the terms and conditions of the within Warrant.
Dated:
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(Signature)* |
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(Name) |
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(Title) |
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(Social Security or Tax Identification No.) |
| * | The signature on this Assignment of Warrant must correspond
to the name as written upon the face of the Common Share Purchase Warrant in every particular without alteration or enlargement or any
change whatsoever. When signing on behalf of a corporation, partnership, trust or other entity, please indicate your position(s) and
title(s) with such entity. |
NEITHER THIS SECURITY NOR THE SECURITIES AS TO
WHICH THIS SECURITY MAY BE EXERCISED HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON SHARE PURCHASE WARRANT
1847 HOLDINGS LLC
Warrant Shares: __________
Date of Issuance: February __, 2023 (“Issuance
Date”)
This COMMON SHARE PURCHASE
WARRANT (the “Warrant”) certifies that, for value received (in connection with the issuance of the promissory note
in the principal amount of $________ to the Holder (as defined below) of even date) (the “Note”), _____________, a
_____________ (including any permitted and registered 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 of issuance hereof, to purchase
from 1847 HOLDINGS LLC, a Delaware limited liability company (the “Company”), ________ Common Shares (the “Warrant
Shares”) (whereby such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant) at the
Exercise Price per share then in effect. This Warrant is issued by the Company as of the date hereof in connection with that certain securities
purchase agreement dated February __, 2023, by and among the Company and the Holder (the “Purchase Agreement”).
Capitalized terms used in
this Warrant shall have the meanings set forth in the Purchase Agreement unless otherwise defined in the body of this Warrant or in Section
12 below. For purposes of this Warrant, the term “Exercise Price” shall mean $0.01, subject to adjustment as provided
herein (including but not limited to cashless exercise), and the term “Exercise Period” shall mean the period commencing
on the Issuance Date and ending on 5:00 p.m. eastern standard time on the five-year anniversary thereof.
(a) Mechanics
of Exercise. Subject to the terms and conditions hereof, the rights represented by this Warrant may be exercised in whole or in part
at any time or times during the Exercise Period by delivery of a written notice, in the form attached hereto as Exhibit A (the
“Exercise Notice”), of the Holder’s election to exercise this Warrant. The Holder shall not be required to deliver
the original Warrant in order to effect an exercise hereunder. 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. On or before the second Trading Day (the “Warrant
Share Delivery Date”) following the date on which the Holder sent the Exercise Notice to the Company or the Company’s
transfer agent, and upon receipt by the Company of payment to the Company of an amount equal to the applicable Exercise Price multiplied
by the number of Warrant Shares as to which all or a portion of this Warrant is being exercised (the “Aggregate Exercise Price”
and together with the Exercise Notice, the “Exercise Delivery Documents”) in cash or by wire transfer of immediately
available funds (or by cashless exercise, in which case there shall be no Aggregate Exercise Price provided), the Company shall (or direct
its transfer agent to) issue and deliver by overnight courier to the address as specified in the Exercise Notice, a certificate, registered
in the Company’s share register in the name of the Holder or its designee, for the number of Common Shares to which the Holder is
entitled pursuant to such exercise (or deliver such Common Shares in electronic format if requested by the Holder). Upon delivery of the
Exercise Delivery Documents, 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 certificates evidencing such
Warrant Shares. If this Warrant is submitted in connection with any exercise and the number of Warrant Shares represented by this Warrant
submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as
practicable and in no event later than three business days after any exercise and at its own expense, issue a new Warrant (in accordance
with Section 6) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.
If the Company fails to cause
its transfer agent to issue to the Holder the respective Common Shares by the respective Warrant Share Delivery Date, then the Holder
will have the right to rescind such exercise in Holder’s sole discretion in addition to all other rights and remedies at law, under
this Warrant, or otherwise, and such failure shall also be deemed a material breach under this Warrant, and a material breach under the
Purchase Agreement.
If the Market Price of one
Common Share is greater than the Exercise Price, then the Holder may elect to receive Warrant Shares pursuant to a cashless exercise,
in lieu of a cash exercise, equal to the value of this Warrant determined in the manner described below (or of any portion thereof remaining
unexercised) by surrender of this Warrant and an Exercise Notice, in which event the Company shall issue to Holder a number of Common
Shares computed using the following formula:
Where |
X = |
the number of Shares to be issued to Holder. |
|
Y = |
the number of Warrant Shares that the Holder elects to purchase under this Warrant (at the date of such calculation). |
|
A = |
the Market Price (at the date of such calculation). |
|
B = |
Exercise Price (as adjusted to the date of such calculation). |
(b) No
Fractional Shares. No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant
hereto. All Warrant Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining
whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance
of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction
a sum in cash equal to the product resulting from multiplying the then-current fair market value of a Warrant Share by such fraction.
(c) Holder’s
Exercise Limitations. Notwithstanding anything to the contrary contained herein, 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 1 or otherwise, to the extent
that after giving effect to such issuance after exercise as set forth on the applicable Exercise Notice, the Holder (together with the
Holder’s affiliates (the “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 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,
nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise
or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other
Common 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 1(c), 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 Holder is solely responsible for any schedules required to be filed
in accordance therewith. 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 1(c), 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 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 two Trading Days 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 at the time of the respective calculation hereunder. In addition to the beneficial
ownership limitations provided in this Warrant, the sum of the number of Common Shares that may be issued under this Warrant shall be
limited to the amount described in Section 4(r) of the Purchase Agreement, unless the Shareholder Approval (as defined in the Purchase
Agreement) is obtained by the Company. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
(d) 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 Company’s transfer agent to transmit to the Holder the Warrant Shares in accordance with the provisions
of this Warrant (including but not limited to Section 1(a) above pursuant to an exercise on or before the respective 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, within
one (1) business day of Holder’s request, 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 product of (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 within one (1) business day of Holder’s request 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, or effectuates a cashless
exercise hereunder for, Common Shares having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise
of 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 Common
Shares upon exercise of the Warrant as required pursuant to the terms hereof.
14. ADJUSTMENTS.
The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:
(a) Distribution
of Assets. 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 or other similar transaction)
(a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Exercise Price in
effect immediately prior to the close of business on the record date fixed for the determination of holders of Common Shares entitled
to receive the Distribution shall be reduced, effective as of the close of business on the payment date for such Distribution, to a price
determined by multiplying such Exercise Price by a fraction (i) the numerator of which shall be the Closing Sale Price of the Common Shares
on the Trading Day immediately preceding the record date for such Distribution minus the value of the Distribution (as determined in good
faith by the Company’s Board of Directors) applicable to one Common Share, and (ii) the denominator of which shall be the Closing
Sale Price of the Common Shares on the Trading Day immediately preceding such record date.
(b) [Intentionally
Omitted].
(c) Subdivision
or Combination of Common Shares. If the Company at any time on or after the Issuance Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding Common Shares into a greater number of shares, the Exercise Price
in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately
increased. If the Company at any time on or after the Issuance Date combines (by combination, reverse stock split or otherwise) one or
more classes of its outstanding Common Shares into a smaller number of shares, the Exercise Price in effect immediately prior to such
combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased. Any adjustment under
this Section 2(c) shall become effective at the close of business on the date the subdivision or combination becomes effective. Each such
adjustment of the Exercise Price shall be calculated to the nearest one-hundredth of a cent. Such adjustment shall be made successively
whenever any event covered by this Section 2(c) shall occur.
15. FUNDAMENTAL
TRANSACTIONS. If, at any time while this Warrant is outstanding, (i) the Company effects any merger of the Company with or into another
entity and the Company is not the surviving entity (such surviving entity, the “Successor Entity”), (ii) the Company
effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange
offer (whether by the Company or by another individual or entity, and approved by the Company) is completed pursuant to which holders
of Common Shares are permitted to tender or exchange their Common Shares for other securities, cash or property and the holders of at
least 50% of the Common Shares accept such offer, or (iv) the Company effects any reclassification 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
(other than as a result of a subdivision or combination of Common Shares) (in any such case, a “Fundamental Transaction”),
then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive the number of Common Shares of the Successor
Entity or of the Company and any additional consideration (the “Alternate Consideration”) receivable upon or as a result
of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of Common Shares for
which this Warrant is exercisable immediately prior to such event (disregarding any limitation on exercise contained herein solely for
the purpose of such determination). 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. To the
extent necessary to effectuate the foregoing provisions, any Successor Entity in such Fundamental Transaction shall issue to the Holder
a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate
Consideration.
16. NON-CIRCUMVENTION.
The Company covenants and agrees that it will not, by amendment of its certificate of formation, operating agreement or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement, 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, and will at all times in good faith carry out
all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality
of the foregoing, the Company (i) shall not increase the par value of any Common Shares receivable upon the exercise of this Warrant above
the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and non-assessable Common Shares upon the exercise of this Warrant, and (iii) shall, for so long as this
Warrant is outstanding, have authorized and reserved, free from preemptive rights, 2.25 times the number of Common Shares into which the
Warrants are then exercisable into to provide for the exercise of the rights represented by this Warrant (without regard to any limitations
on exercise).
17. WARRANT
HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise specifically provided herein, this Warrant, in and of itself, shall not entitle
the Holder to any voting rights or other rights as a shareholder of the Company. In addition, nothing contained in this Warrant shall
be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a
shareholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
18. REISSUANCE.
(a) Lost,
Stolen or Mutilated Warrant. If this Warrant is lost, stolen, mutilated or destroyed, the Company will, on such terms as to indemnity
or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new
Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed.
(b) Issuance
of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant shall
be of like tenor with this Warrant, and shall have an issuance date, as indicated on the face of such new Warrant which is the same as
the Issuance Date.
19. TRANSFER.
This Warrant shall be binding upon the Company and its successors and assigns, and shall inure to be the benefit of the Holder and its
successors and assigns. Notwithstanding anything to the contrary herein, the rights, interests or obligations of the Company hereunder
may not be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior signed written consent of
the Holder, which consent may be withheld at the sole discretion of the Holder (any such assignment or transfer shall be null and void
if the Company does not obtain the prior signed written consent of the Holder). This Warrant or any of the severable rights and obligations
inuring to the benefit of or to be performed by Holder hereunder may be assigned by Holder to a third party, in whole or in part, without
the need to obtain the Company’s consent thereto.
20. NOTICES.
Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance
with the notice provisions contained in the Purchase Agreement. The Company shall provide the Holder with prompt written notice (i) immediately
upon any adjustment of the Exercise Price, setting forth in reasonable detail, the calculation of such adjustment and (ii) at least 20
days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the
Common Shares, (B) with respect to any grants, issuances or sales of any stock or other securities directly or indirectly convertible
into or exercisable or exchangeable for Common Shares or other property, pro rata to the holders of Common Shares or (C) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall
be made known to the public prior to or in conjunction with such notice being provided to the Holder.
21. 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.
22. GOVERNING
LAW AND VENUE. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware without regard
to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this
Warrant or any other agreement, certificate, instrument or document contemplated hereby shall be brought only in the state courts located
in the Court of Chancery of the State of Delaware or, to the extent such court does not have subject matter jurisdiction, the United States
District Court for the District of Delaware or, to the extent that neither of the foregoing courts has jurisdiction, the Superior Court
of the State of Delaware. The parties to this Warrant hereby irrevocably waive any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR UNDER ANY OTHER TRANSACTION DOCUMENT ENTERED INTO IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED
HEREBY OR THEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs.
In the event that any provision of this Warrant or any other agreement delivered in connection herewith is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives
personal service of process and consents to process being served in any suit, action or proceeding in connection with this Warrant or
any other transaction document entered into in connection with this Warrant 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 the Purchase 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 law.
23. ACCEPTANCE.
Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.
24. CERTAIN
DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:
(a) “Closing
Sale Price” means, for any security as of any date, (i) the last closing trade price for such security on the Principal Market,
as reported by Quotestream or other similar quotation service provider designated by the Holder, or, if the Principal Market begins to
operate on an extended hours basis and does not designate the closing trade price, then the last trade price of such security prior to
4:00 p.m., New York time, as reported by Quotestream or other similar quotation service provider designated by the Holder, or (ii) if
the foregoing does not apply, the last trade price of such security in the over-the-counter market for such security as reported by Quotestream
or other similar quotation service provider designated by the Holder, or (iii) if no last trade price is reported for such security by
Quotestream or other similar quotation service provider designated by the Holder, the average of the bid and ask prices of any market
makers for such security as reported by Quotestream or other similar quotation service provider designated by the Holder. If the Closing
Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security
on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations to be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.
(b) “Common
Shares” means the Company’s common shares, and any other class of securities into which such securities may hereafter
be reclassified or changed.
(c) “Common
Share Equivalents” means any securities of the Company that would entitle the holder thereof to acquire at any time Common Shares,
including without limitation any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Shares.
(d) “Person”
and “Persons” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust,
an unincorporated organization, any other entity and any governmental entity or any department or agency thereof.
(e) “Principal
Market” means the principal securities exchange or trading market where such Common Shares are listed or quoted, including but
not limited to any tier of the OTC Markets, any tier of the NASDAQ Stock Market (including NASDAQ Capital Market), or the NYSE American,
or any successor to such markets.
(f) “Market
Price” means the highest traded price of the Common Shares during the thirty Trading Days prior to the date of the respective
Exercise Notice.
(g) “Trading
Day” means any day on which the Common Shares are listed or quoted on its Principal Market, provided, however, that if the Common
Shares are not then listed or quoted on any Principal Market, then any calendar day.
* * * * * * *
IN WITNESS WHEREOF, the Company has caused this
Warrant to be duly executed as of the Issuance Date set forth above.
|
1847 HOLDINGS LLC |
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By: |
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Name: |
Ellery Roberts |
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Title: |
Chief Executive Officer |
EXHIBIT A
EXERCISE NOTICE
(To be executed by the registered holder to exercise
this Common Share Purchase Warrant)
THE UNDERSIGNED holder hereby
exercises the right to purchase _____________ of the Common Shares (“Warrant Shares”) of 1847 HOLDINGS LLC, a Delaware limited
liability company (the “Company”), evidenced by the attached copy of the Common Share Purchase Warrant (the “Warrant”).
Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
| 4. | Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as
(check one): |
| ☐ | a cash exercise with respect to Warrant Shares; or |
| ☐ | by cashless exercise pursuant to the Warrant. |
| 5. | Payment of Exercise Price. If cash exercise is selected above, the holder shall pay the applicable
Aggregate Exercise Price in the sum of $ to the Company in accordance with the terms of the Warrant. |
| 6. | Delivery of Warrant Shares. The Company shall deliver to the holder Warrant Shares in
accordance with the terms of the Warrant. |
Date:
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(Print Name of Registered Holder) |
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By: |
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Name: |
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Title: |
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EXHIBIT B
ASSIGNMENT OF WARRANT
(To be signed only upon authorized transfer
of the Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns, and transfers unto _________________________________ the right to purchase ____________ common shares of 1847 HOLDINGS LLC, to
which the within Common Share Purchase Warrant relates and appoints ___________________________, as attorney-in-fact, to transfer said
right on the books of 1847 HOLDINGS LLC with full power of substitution and re-substitution in the premises. By accepting such transfer,
the transferee has agreed to be bound in all respects by the terms and conditions of the within Warrant.
Dated: _____________
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(Signature)* |
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(Name) |
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(Title) |
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(Social Security or Tax Identification No.) |
| * | The signature on this Assignment of Warrant must correspond
to the name as written upon the face of the Common Share Purchase Warrant in every particular without alteration or enlargement or any
change whatsoever. When signing on behalf of a corporation, partnership, trust or other entity, please indicate your position(s) and
title(s) with such entity. |
Annex B
2023 Equity Incentive Plan
1847 HOLDINGS LLC
2023 Equity Incentive Plan
ARTICLE 1
Establishment, Purpose, and Duration
1.1 Establishment.
1847 Holdings LLC, a Delaware limited liability company (hereinafter referred to as the “Company”),
establishes an incentive compensation plan to be known as the 1847 Holdings LLC 2023 Equity Incentive Plan (hereinafter referred to as
the “Plan”), as set forth in this document. This Plan permits the grant of Options,
SARs, Restricted Shares, Restricted Share Units, Performance Shares, Performance Share Units and Other Share-Based Awards.
1.2 Purpose
of this Plan. The purpose of this Plan is to provide a means whereby Employees, Directors and Consultants of the Company, its Subsidiaries
and Affiliates develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and
to encourage them to devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its
shareholders. A further purpose of this Plan is to provide a means through which the Company may attract able individuals to provide services
to or for the benefit of the Company and to provide a means for such individuals to acquire and maintain share ownership in the Company,
thereby strengthening their concern for the welfare of the Company.
1.3 Duration
of this Plan. This Plan became effective on , 2023. Unless sooner terminated as provided herein, this Plan shall terminate on , 2033.
After this Plan is terminated, no Awards may be granted, but Awards previously granted shall remain outstanding in accordance with their
applicable terms and conditions and this Plan’s terms and conditions.
ARTICLE 2
Definitions
Whenever used in this Plan, the following terms
shall have the meanings set forth below.
“Affiliate”
means any corporation or other entity (including, but not limited to, a partnership or a limited liability company), that directly or
indirectly through one or more intermediaries, controls, is controlled by or is under common control with, the corporation or other entity
in question.
“Award”
means, individually or collectively, a grant under this Plan of Options, SARs, Restricted Shares, Restricted Share Units, Performance
Shares, Performance Share Units, or Other Share-Based Awards, in each case subject to the terms of this Plan.
“Award Agreement”
means either (a) a written agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to
an Award granted under this Plan, or (b) a written or electronic statement issued by the Company to a Participant describing the terms
and provisions of such Award, including any amendment or modification thereof. The Committee may provide for the use of electronic, internet
or other non-paper Award Agreements, and the use of electronic, internet or other non-paper means for the acceptance thereof and actions
thereunder by a Participant.
“Beneficial Owner”
or “Beneficial Ownership” has the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations
under the Exchange Act.
“Board”
means the Board of Directors of the Company.
“Cause” means:
(a) with respect to any Employee or Consultant, if the Employee or Consultant is a party to an employment or service agreement with the
Company, its Affiliates or Subsidiaries and such agreement provides for a definition of Cause, the definition contained therein, or if
no such agreement exists, or if such agreement does not define Cause, (i) the commission of, or plea of guilty or no contest to, a felony
or a crime involving moral turpitude or the commission of any other act involving willful malfeasance or material fiduciary breach with
respect to the Company, its Affiliates or Subsidiaries, (ii) conduct that results in or is reasonably likely to result in harm to the
reputation or business of the Company, its Affiliates or Subsidiaries, (iii) gross negligence or willful misconduct with respect to the
Company, its Affiliates or Subsidiaries, or (iv) material violation of state or federal securities laws; and (b) with respect to any Director,
a determination by a majority of the disinterested Board members that the Director has engaged in malfeasance in office, gross misconduct
or neglect, false or fraudulent misrepresentation inducing the Director’s appointment, willful conversion of corporate funds, or
repeated failure to participate in Board meetings on a regular basis despite having received proper notice of the meetings in advance.
The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to whether a Participant has
been discharged for Cause.
“Change of Control”
means, with respect to the Company, the first to occur of: (a) the date that a reorganization, merger, consolidation, recapitalization,
or similar transaction (other than a spinoff, exchange offer or similar transaction to or with the Company’s public shareholders)
is consummated, unless: (i) at least 50% of the outstanding voting securities of the surviving or resulting entity (including, without
limitation, an entity which as a result of such transaction owns the Company either directly or through one or more subsidiaries) (“Resulting
Entity”) are beneficially owned, directly or indirectly, by the persons who were the Beneficial Owners of the outstanding voting
securities of the Company immediately prior to such transaction in substantially the same proportions as their Beneficial Ownership, immediately
prior to such transaction, of the outstanding voting securities of the Company and (ii) immediately following such transaction no person
or persons acting as a group beneficially owns capital stock of the Resulting Entity possessing thirty-five percent (35%) or more of the
total voting power of the stock of the Resulting Entity; (b) the date that a majority of members of the Board is replaced during any twelve
(12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date
of the appointment or election; provided that no individual shall be considered to be so endorsed if such individual initially assumed
office as a result of either an actual or threatened “Election Contest” (as described in Rule 14a-11 promulgated under
the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a
“Proxy Contest”) including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest;
(c) the date that any one person, or persons acting as a group, acquires (or has or have acquired as of the date of the most recent acquisition
by such person or persons) Beneficial Ownership of shares of the Company possessing thirty-five percent (35%) or more of the total voting
power of the shares of the Company; or (d) the date that any one person acquires, or persons acting as a group acquire (or has or have
acquired as of the date of the most recent acquisition by such person or persons), assets from the Company that have a total gross fair
market value equal to or more than forty percent (40%) of the total gross fair market value of all of the assets of the Company immediately
before such acquisition or acquisitions. For the avoidance of doubt, there can only be one Change of Control for purposes of the Plan.
“Code”
means the U.S. Internal Revenue Code of 1986, as amended from time to time. For purposes of this Plan, references to sections of the Code
shall be deemed to include references to any applicable regulations thereunder and any successor or similar provision.
“Committee” means
the compensation committee of the Board, or if no such committee has been established, the full Board, or a committee of one or more members
appointed to administer the Plan by the Board.
“Consultant” means
any individual who is engaged by the Company, its Affiliates and/or its Subsidiaries to render consulting or advisory services.
“Continuous Service” means
that the Participant’s service with the Company, its Affiliates and/or its Subsidiaries, whether as an Employee, Consultant or Director,
is not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to have terminated merely because of
a change in the capacity in which the Participant renders service to the Company, its Affiliates and/or its Subsidiaries as an Employee,
Consultant or Director, or a change in the entity for which the Participant renders such service, provided that there is no interruption
or termination of the Participant’s Continuous Service; provided further that if any Award is subject to Section 409A, this sentence
shall only be given effect to the extent consistent with Section 409A. The Committee or its delegate, in its sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick
leave, military leave or any other personal or family leave of absence.
“Director”
means any individual who is a member of the Board.
“Disability” means
that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental
impairment; provided, however, for purposes of determining the term of an Incentive Stock Option, the term Disability shall have the meaning
ascribed to it under Section 22(e)(3) of the Code. The determination of whether an individual has a Disability shall be determined under
procedures established by the Committee. Except in situations where the Committee is determining Disability for purposes of the term of
an Incentive Stock Option within the meaning of Section 22(e)(3) of the Code, the Committee may rely on any determination that a Participant
is disabled for purposes of benefits under any long-term disability plan maintained by the Company, its Affiliates and/or Subsidiaries
in which a Participant participates. The foregoing notwithstanding, if the Award is subject to Section 409A, in no event shall a Disability
be deemed to have occurred unless such disability satisfies the requirements of Section 409A.
“Dividend Equivalent
Right” means a right, to be credited to an Award granted to a Participant, as described in Article 13 hereof.
“Eligible Individual”
means an individual who is an Employee, a Director, or a Consultant, in each case to the extent permissible under Form S-8 under the Securities
Act of 1933, as amended from time to time.
“Employee”
means any person designated as an employee of the Company, its Affiliates and/or its Subsidiaries on the payroll records thereof. An Employee
shall not include any individual during any period he or she is classified or treated by the Company, Affiliate, and/or Subsidiary as
an independent contractor, a consultant, or any employee of an employment, consulting, or temporary agency or any other entity other than
the Company, Affiliate, and/or Subsidiary, without regard to whether such individual is subsequently determined to have been, or is subsequently
retroactively reclassified as a common-law employee of the Company, Affiliate, and/or Subsidiary during such period.
“Exchange Act”
means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
“Fair Market Value” means,
as of any date, the value of a Share as determined below. If the Shares are listed on any established national stock exchange or over-the-counter
market system, including, without limitation, the New York Stock Exchange, the Nasdaq Stock Market, or any tier of the over-the-counter
market maintained by OTC Markets Group, Inc., the Fair Market Value shall be the closing price of a Share (or if no sales were reported,
the closing price on the date immediately preceding such date) as quoted on such exchange or system on the day of determination. In the
absence of an established market for the Shares, the Fair Market Value shall be determined in good faith by the Committee and such determination
shall be conclusive and binding on all persons; provided that if an Award is subject to Section 409A, then the Fair Market Value shall
be determined in accordance with Section 409A of the Code.
“Family Members”
of a Participant means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of such Participant, including adoptive relationships,
any person sharing such Participant’s household (other than a tenant or employee), a trust in which such individuals have more than
fifty percent of the beneficial interest, a foundation in which these individuals (or the Participant) control the management of assets,
and any other entity in which these individuals (or the Participant) own more than fifty percent of the voting interest.
“Freestanding SAR”
means an SAR that is granted independently of any Options, as described in Article 7.
“Grant Price”
means the price established at the time of grant of an SAR pursuant to Article 7, used to determine whether there is any payment due upon
exercise of the SAR.
“Incentive Share
Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.
“Non-qualified Share
Option” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.
“Nonemployee Director”
means a Director who is not an Employee.
“Option”
means an option to purchase one or more Shares, granted pursuant to Article 6.
“Option Price”
means the price at which a Share may be purchased by a Participant pursuant to an Option.
“Other Share-Based
Award” means an equity-based or equity-related Award not otherwise described by the terms of this Plan, granted pursuant to
Article 10.
“Participant”
means any Eligible Individual as set forth in Article 5 to whom an Award is granted.
“Performance Measures”
means measures as described in Article 12 on which the performance goals of certain Awards may be based.
“Performance Period”
means the period of time during which the performance goals must be met in order to determine the degree of payout and/or vesting with
respect to an Award.
“Performance Share”
means an Award under Article 9 herein and subject to the terms of this Plan, denominated in Shares, the value of which at the time it
is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.
“Performance Share
Unit” means an Award under Article 9 herein and subject to the terms of this Plan, denominated in units, the value of which
at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.
“Period of Restriction”
means the period when Restricted Shares or Restricted Share Units are subject to a substantial risk of forfeiture (based on the passage
of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, in its discretion),
as provided in Article 8.
“Permitted Transfer”
means any transfer of an Award by a Participant to a Participant’s Family Member made by gift or domestic relations order if such
transfer is not for value; provided, however, that neither (a) a transfer under a domestic relations order in settlement of marital property
rights nor (b) a transfer to an entity in which more than fifty percent of the voting interests are owned by Family Members or the Participant
in exchange for an interest in that entity shall be deemed a transfer for value for the purposes of determining whether a transfer is
a Permitted Transfer.
“Restricted Share”
means an Award granted to a Participant pursuant to Article 8.
“Restricted Share
Unit” means an Award granted to a Participant pursuant to Article 8, where no Shares are actually awarded to the Participant
on the date of grant.
“SAR”
means an Award, designated as a SAR, pursuant to the terms of Article 7 herein.
“Section 409A”
means Section 409A of the Code, the regulations thereunder promulgated by the United States Department of Treasury and other guidance
issued thereunder.
“Share”
means a common share of the Company.
“Subsidiary”
means any corporation or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, a proprietary
interest of fifty percent (50%) or more by reason of share ownership or otherwise.
“Tandem SAR”
means an SAR that is granted in connection with a related Option pursuant to Article 7 herein, the exercise of which shall require forfeiture
of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR shall similarly
be canceled).
“Ten Percent Shareholder” means
a person who owns (or is deemed to own pursuant to Section 424(d) of the Code) shares possessing more than 10% of the total combined voting
power of all classes of shares of the Company or of any of its Affiliates.
ARTICLE 3
Administration
3.1 General.
The Committee shall be responsible for administering this Plan, subject to this Article 3 and the other provisions of this Plan. In connection
with its administration of the Plan, the Committee may employ attorneys, consultants, accountants, agents, and other individuals, any
of whom may be an Employee, and the Committee, the Company, and its officers and Directors shall be entitled to rely upon the advice,
opinions, or valuations of any such individuals. All actions taken and all interpretations and determinations made by the Committee shall
be final and binding upon the Participants, the Company, and all other interested individuals.
3.2 Authority
of the Committee. The Committee shall have full and exclusive discretionary power to interpret the terms and the intent of this Plan
and any Award Agreement or other agreement or document ancillary to or in connection with this Plan, to determine eligibility for Awards
and to adopt such rules, regulations, forms, instruments, and guidelines for administering this Plan as the Committee may deem necessary
or proper. Such authority shall include, but not be limited to, selecting Award recipients, establishing all Award terms and conditions,
including the terms and conditions set forth in Award Agreements, granting Awards as an alternative to or as the form of payment for grants
or rights earned or due under compensation plans or arrangements of the Company, construing any ambiguous provision of the Plan or any
Award Agreement, and, subject to Article 16, correcting a defect or supplying any omission, or reconciling any inconsistency so that this
Plan or any Award Agreement complies with applicable law, regulations and listing requirements and so as to avoid unanticipated consequences
or address unanticipated events (including any temporary closure of the stock exchange on which the Shares are listed, disruption of communications
or natural catastrophe), or adopting modifications and amendments to this Plan or any Award Agreement, including without limitation, any
that are necessary to comply with the laws of the countries and other jurisdictions in which the Company, its Affiliates, and/or its Subsidiaries
operate.
ARTICLE 4
Shares Subject to this Plan and Maximum Awards
4.1 Number
of Shares Available for Awards. Subject to adjustment as provided in Section 4.3 herein, the maximum number of Shares available for
issuance to Participants under this Plan shall be 2,000,000 Shares.
4.2 Share
Usage. Shares covered by an Award shall only be counted as used to the extent they are actually issued. Any Shares related to Awards
which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such Shares, are settled in cash in lieu
of Shares, or are exchanged with the Committee’s permission, prior to the issuance of Shares, for Awards not involving Shares, shall
be available again for grant under this Plan. Moreover, if the Option Price of any Option granted under this Plan or the tax withholding
requirements with respect to any Award granted under this Plan are satisfied by tendering Shares to the Company (by either actual delivery
or by attestation), or if an SAR is exercised, only the number of Shares issued, net of the Shares tendered, if any, will be deemed delivered
for purposes of determining the maximum number of Shares available for delivery under this Plan. The Shares available for issuance under
this Plan may be authorized and unissued Shares or treasury Shares.
4.3 Adjustments
in Authorized Shares.
(a) If
the outstanding securities of the class then subject to this Plan are increased, decreased or exchanged for or converted into cash, property
or a different number or kind of securities, or if cash, property or securities are distributed in respect of those outstanding securities,
in any case as a result of a reorganization, merger consolidation, recapitalization, restructuring, reclassification, extraordinary dividend
or other distribution (other than cash dividends), share split, reverse share split or the like, or if substantially all of the property
and assets of the Company are sold, then, the Committee shall make appropriate and proportionate adjustments in (i) the number, price
(if applicable) and type of shares or other securities or cash or other property that may be subject to Awards previously granted under
this Plan and (ii) the maximum number and type of shares or other securities or cash or other property that may be issued pursuant to
Awards thereafter granted under this Plan.
(b) Subject
to Section 16.3 and Article 12, the Committee, in its sole discretion, may also make appropriate adjustments in the terms of any Awards
under this Plan to reflect or related to such changes or distributions and to modify any other terms of outstanding Awards, including
modifications of performance goals and changes in the length of Performance Periods. Subject to Section 16.3, the determination of the
Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under this Plan.
(c) Subject
to the provisions of Article 16 and notwithstanding anything else herein to the contrary, without affecting the number of Shares reserved
or available hereunder, the Committee may authorize the issuance or assumption of benefits under this Plan in connection with any merger,
consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate (including,
but not limited to, a conversion of equity awards into Awards under this Plan in a manner consistent with applicable regulations), subject
to compliance with the rules under Code Section 424, as and where applicable.
ARTICLE 5
Eligibility and Participation
5.1 Eligibility.
Subject to Section 17.12 hereof, individuals eligible to participate in this Plan shall consist of all Eligible Individuals.
5.2 Actual
Participation. Subject to the provisions of this Plan, the Committee may, from time to time, select from all Eligible Individuals
those individuals to whom Awards shall be granted and shall determine, in its sole discretion, the nature of, any and all terms permissible
by law, and the amount of each Award; provided that, (i) in the case of Awards to Eligible Individuals engaged by Affiliates rather than
by the Company, the Committee has determined that such individuals have provided, or are expected to provide, services to the Company,
and (ii) in the case of Options, that the Shares subject thereto qualify as “service recipient stock” with respect to the
Participant for purposes of Section 409A.
ARTICLE 6
Share Options
6.1 Grant
of Options. Subject to the terms and provisions of this Plan, Options may be granted to Participants in such number, and upon such
terms, and at any time and from time to time as shall be determined by the Committee, in its sole discretion. All Options shall be separately
designated Incentive Share Options or Non-qualified Share Options at the time of grant, and, if certificates are issued, a separate certificate
or certificates will be issued for Shares purchased on exercise of each type of Option. Notwithstanding the foregoing, the Company shall
have no liability to any Participant or any other person if an Option designated as an Incentive Share Option fails to qualify as such
at any time or if an Option is determined to constitute “nonqualified deferred compensation” within the meaning of Section
409A and the terms of such Option do not satisfy the requirements of Section 409A.
6.2 Award
Agreement. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the maximum duration of
the Option, the number of Shares to which the Option pertains, the conditions upon which an Option shall become vested and exercisable,
and such other provisions as the Committee shall determine which are not inconsistent with the terms of this Plan.
6.3 Option
Price. The Option Price for each grant of an Option under this Plan shall be determined by the Committee in its sole discretion and
shall be specified in the Award Agreement; provided, however, that (a) the Option Price must be at least equal to one hundred percent
(100%) of the Fair Market Value of the Shares as determined on the date of grant and (b) and the Option Price of any Incentive Share Option
granted to a Ten Percent Shareholder must be at least equal to one hundred ten percent (110%) of the Fair Market Value of the Shares as
determined on the date of grant.
6.4 Term
of Options. Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant;
provided, however, that (a) no Option shall be exercisable later than the tenth (10th) anniversary date of its grant and (b) no Incentive
Share Option granted to a Ten Percent Shareholder shall be exercisable later than the fifth (5th) anniversary of its date of grant.
6.5 Exercise
of Options. Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions
as the Committee shall in each instance approve, which terms and restrictions need not be the same for each grant or for each Participant.
6.6 Payment.
(a) Options
granted under this Article 6 shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company
in a form specified or accepted by the Committee, or by complying with any alternative procedures which may be authorized by the Committee,
setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares.
(b) A
condition of the issuance of the Shares as to which an Option shall be exercised shall be the payment of the Option Price. The Option
Price of any Option shall be payable to the Company in full either: (i) in cash or its equivalent; (ii) by tendering (either by actual
delivery or attestation) previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the Option
Price; (iii) a cashless exercise (broker-assisted exercise) through a “same day sale” commitment; (iv) by a combination of
(i), (ii), and (iii); or (v) any other method approved or accepted by the Committee in its sole discretion.
(c) Subject
to any governing rules or regulations, as soon as practicable after receipt of written notification of exercise and full payment (including
satisfaction of any applicable tax withholding), the Company shall deliver to the Participant evidence of book entry Shares in an appropriate
amount based upon the number of Shares purchased under the Option(s).
(d) Unless
otherwise determined by the Committee, all payments under all of the methods indicated above shall be paid in United States dollars.
6.7 Restrictions
on Share Transferability. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions
under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed
and/or traded, or under any blue sky or state securities laws applicable to such Shares. Notwithstanding the foregoing, an Incentive Share
Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime
of the holder only by the holder; provided that holder may, by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the holder, shall thereafter be entitled to exercise the Option.
6.8 Termination
of Continuous Service. Each Participant’s Award Agreement shall set forth the extent to which the Participant shall have the
right to exercise the Option following termination of the Participant’s Continuous Service. Such provisions shall be determined
in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform
among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for termination.
ARTICLE 7
Share Appreciation Rights
7.1 Grant
of SARs.
(a) Subject
to the terms and conditions of this Plan, SARs may be granted to Participants at any time and from time to time as shall be determined
by the Committee. The Committee may grant Freestanding SARs, Tandem SARs, or any combination of these forms of SARs.
(b) Subject
to the terms and conditions of this Plan, the Committee shall have complete discretion in determining the number of SARs granted to each
Participant and, consistent with the provisions of this Plan, in determining the terms and conditions pertaining to such SARs.
(c) The
Grant Price for each grant of a Freestanding SAR shall be determined by the Committee and shall be specified in the Award Agreement; provided,
however, the Grant Price on the date of grant must be at least equal to one hundred percent (100%) of the Fair Market Value of the Shares
as determined on the date of grant. The Grant Price of Tandem SARs shall be equal to the Option Price of the related Option.
7.2 SAR
Agreement. Each SAR Award shall be evidenced by an Award Agreement that shall specify the Grant Price, the term of the SAR, and such
other provisions as the Committee shall determine.
7.3 Term
of SAR. The term of an SAR granted under this Plan shall be determined by the Committee, in its sole discretion, and except as determined
otherwise by the Committee and specified in the SAR Award Agreement, no SAR shall be exercisable later than the tenth (10th) anniversary
date of its grant.
7.4 Exercise
of Freestanding SARs. Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion,
imposes.
7.5 Exercise
of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the
right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which
its related Option is then exercisable.
7.6 Settlement
of SAR Amount. Subject to Section 17.14 herein, upon the exercise of an SAR, a Participant shall be entitled to receive payment from
the Company, in the form of cash, Shares or a combination of cash and Shares as the Committee in its sole discretion shall determine,
in an amount determined by multiplying (a) the excess of the Fair Market Value of a Share on the date of exercise over the Grant Price,
less applicable tax withholding by (b) the number of Shares with respect to which the SAR is exercised.
7.7 Termination
of Continuous Service. Each Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the
SAR following termination of the Participant’s Continuous Service. Such provisions shall be determined in the sole discretion of
the Committee, shall be included in the Award Agreement entered into with Participants, need not be uniform among all SARs issued pursuant
to this Plan, and may reflect distinctions based on the reasons for termination.
7.8 Other
Restrictions. The Committee shall impose such other conditions and/or restrictions on any Shares received upon exercise of an SAR
granted pursuant to this Plan as it may deem advisable or desirable. These restrictions may include, but shall not be limited to, a requirement
that the Participant hold the Shares received upon exercise of an SAR for a specified period of time.
ARTICLE 8
Restricted Shares and Restricted Share Units
8.1 Grant
of Restricted Shares or Restricted Share Units. Subject to the terms and provisions of this Plan, the Committee, at any time and from
time to time, may grant Restricted Shares and/or Restricted Share Units to Participants in such amounts as the Committee shall determine.
Restricted Share Units shall be similar to Restricted Shares except that no Shares are actually awarded to the Participant on the date
of grant.
8.2 Restricted
Shares or Restricted Share Unit Agreement. Each grant of Restricted Shares and/or Restricted Share Units shall be evidenced by an
Award Agreement that shall specify the Period(s) of Restriction, the number of Restricted Shares or the number of Restricted Share Units
granted, and such other provisions as the Committee shall determine.
8.3 Other
Restrictions.
(a) The
Committee shall impose such other conditions and/or restrictions on any Restricted Shares or Restricted Share Units granted pursuant to
this Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for
each Restricted Share or each Restricted Share Unit, restrictions based upon the achievement of specific performance goals, time-based
restrictions on vesting following the attainment of the performance goals, time-based restrictions, restrictions under applicable laws
or under the requirements of any stock exchange or market upon which such Shares are listed or traded, and/or holding requirements or
sale restrictions placed on the Shares by the Company upon vesting of such Restricted Shares or Restricted Share Units.
(b) To
the extent deemed appropriate by the Committee, the Company may retain the certificates representing Restricted Shares in the Company’s
possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied or lapse.
(c) Except
as otherwise provided in this Article 8, Restricted Shares covered by each Restricted Share Award shall become freely transferable by
the Participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse (including satisfaction of
any applicable tax withholding obligations), and Restricted Share Units shall be paid in cash, Shares, or a combination of cash and Shares
as the Committee, in its sole discretion, shall determine.
8.4 Legend.
In addition to any legends pursuant to Section 8.3, each Restricted Share granted pursuant to this Plan may bear a legend such as the
following or as otherwise determined by the Committee in its sole discretion:
THE SALE OR TRANSFER OF SHARES REPRESENTED
BY THIS CERTIFICATE, WHETHER VOLUNTARY, INVOLUNTARY, OR BY OPERATION OF LAW, IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH
IN THE 1847 HOLDINGS LLC 2022 EQUITY INCENTIVE PLAN, AND IN THE ASSOCIATED AWARD AGREEMENT. A COPY OF THIS PLAN AND SUCH AWARD AGREEMENT
MAY BE OBTAINED FROM 1847 HOLDINGS LLC.
8.5 Shareholder
Rights. Unless otherwise determined by the Committee and set forth in a Participant’s Award Agreement, to the extent permitted
or required by law, as determined by the Committee, Participants holding Restricted Shares granted hereunder shall have the right to receive
dividends in cash or other property or distribution rights in respect of their Restricted Shares, to the extent made available under the
terms of the Awards granting the Restricted Shares, and may be granted the right to exercise full voting rights with respect to those
Shares during the Period of Restriction. A Participant shall have no voting rights at any time with respect to any Restricted Share Units
granted hereunder. Notwithstanding the foregoing, dividends and/or Dividend Equivalent Rights that relate to Awards that vest in whole
or in part subject to performance goals or conditions shall, to the extent made available under the terms of the Awards, be subject to
the same performance goals or conditions as the underlying Award.
8.6 Termination
of Continuous Service. Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Restricted
Shares and/or Restricted Share Units following termination of the Participant’s Continuous Service. Such provisions shall be determined
in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform
among all Restricted Shares or Restricted Share Units issued pursuant to this Plan, and may reflect distinctions based on the reasons
for termination.
8.7 Section
83(b) Election. The Committee may provide in an Award Agreement that the Award of Restricted Shares is conditioned upon the Participant
making or refraining from making an election with respect to the Award under Code Section 83(b). If a Participant makes an election pursuant
to Code Section 83(b) concerning a Restricted Share Award, the Participant shall be required to file promptly a copy of such election
with the Company.
ARTICLE 9
Performance Share Units/Performance Shares
9.1 Grant
of Performance Share Units/Performance Shares. Subject to the terms and provisions of this Plan, the Committee, at any time and from
time to time, may grant Performance Share Units and/or Performance Shares to Participants in such amounts and upon such terms as the Committee
shall determine.
9.2 Value
of Performance Share Units/Performance Shares. Each Performance Share Unit shall have an initial value that is established by the
Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date
of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine
the value and/or number of Performance Share Units/Performance Shares that will be paid out to the Participant.
9.3 Earning
of Performance Share Units/Performance Shares. Subject to the terms of this Plan, after the applicable Performance Period has ended,
the holder of Performance Share Units/Performance Shares shall be entitled to receive payout on the value and number of Performance Share
Units/Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which
the corresponding performance goals have been achieved.
9.4 Form
and Timing of Payment of Performance Share Units/Performance Shares. Payment of earned Performance Share Units/Performance Shares
shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the terms of this Plan, the Committee, in
its sole discretion, may pay earned Performance Share Units/Performance Shares in the form of cash or in Shares (or in a combination thereof)
equal to the value of the earned Performance Share Units/Performance Shares at the close of the applicable Performance Period, or as soon
as practicable after the end of the Performance Period. Any Shares may be granted subject to any restrictions deemed appropriate by the
Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement
pertaining to the grant of the Award.
9.5 Termination
of Continuous Service. Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Performance
Share Units and/or Performance Shares following termination of the Participant’s Continuous Service. Such provisions shall be determined
in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform
among all Awards of Performance Share Units or Performance Shares issued pursuant to this Plan, and may reflect distinctions based on
the reasons for termination.
ARTICLE 10
Other Share-Based Awards
10.1 Other
Share-Based Awards. The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms
of this Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions,
as the Committee shall determine. Such Awards may involve the transfer of actual Shares to Participants, and may include, without limitation,
Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
10.2 Value
of Other Share-Based Awards. Each Other Share-Based Award shall be expressed in terms of Shares or units based on Shares, as determined
by the Committee. The Committee may establish performance goals in its discretion. If the Committee exercises its discretion to establish
performance goals, the number and/or value of Other Share-Based Awards that will be paid out to the Participant will depend on the extent
to which the performance goals are met.
10.3 Payment
of Other Share-Based Awards. Payment, if any, with respect to an Other Share-Based Award shall be made in accordance with the terms
of the Award, in cash or Shares as the Committee determines.
10.4 Termination
of Continuous Service. The Committee shall determine the extent to which the Participant shall have the right to receive Other Share-Based
Awards following termination of the Participant’s Continuous Service. Such provisions shall be determined in the sole discretion
of the Committee, and may be included in an agreement entered into with each Participant, but need not be uniform among all Other Share-Based
Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
ARTICLE 11
Transferability of Awards
Except for any Permitted Transfers provided for
in a Participant’s Award Agreement, which Permitted Transfers may be subject to additional restrictions determined by the Committee
and as set forth in the Award Agreement, no other Award granted under this Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except with respect to interests in
Awards which have been subject to a Permitted Transfer provided for in a Participant’s Award Agreement, all Awards granted to a
Participant under this Plan, as applicable, shall be exercisable during his or her lifetime only by such Participant. With respect to
those Awards, if any, that are subject to Permitted Transfers, references in this Plan to exercise or payment related to such Awards by
or to the Participant shall be deemed to include, as determined by the Committee, the Participant’s Family Members to whom such
Permitted Transfers were made.
ARTICLE 12
Performance Measures
12.1 Performance
Measures. Awards under this Plan may be granted or may become vested or payable based upon the achievement of Performance Measures
specified by the Committee. Performance Measures under this Plan include:
| (c) | Pretax operating income; |
| (d) | Net earnings or net income
(before or after taxes); |
| (e) | Earnings per Share (or
other equity interest); |
| (f) | Net sales or revenue growth; |
| (h) | Return measures (including, but not limited to, return on assets, capital,
invested capital, equity, sales, or revenue); |
| (i) | Cash flow (including, but not limited to, operating cash flow, free
cash flow, cash flow return on equity, and cash flow return on investment); |
| (j) | Earnings before or after
taxes, interest, depreciation, and/or amortization; |
| (k) | Gross or operating margins; |
| (n) | Cost reductions and savings; |
| (o) | Share (or other equity)
price (including, but not limited to, growth measures); |
| (p) | Consummation of debt and
equity offerings; |
| (q) | Equity capital raised; |
| (u) | Customer satisfaction; |
| (v) | Working capital targets; |
| (w) | Total shareholder return; |
| (x) | Actual or adjusted funds
from operations (FFO); |
| (y) | Actual or adjusted funds
from acquisitions (FFA); and |
| (z) | Such other business and/or
personal criteria as may be deemed appropriate by the Committee. |
Any Performance Measure(s)
may be used to measure the performance of the Company, any of its Affiliates or operating units or any combination of the foregoing, annually
or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to a previous year’s result
as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparator
companies, or published or special index that the Committee, in its sole discretion, deems appropriate, or the Company may select Performance
Measure (o) above as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting
of any Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Article 12.
12.2 Evaluation
of Performance. The Committee may provide in any such Award that any evaluation of performance may include or exclude, and may adjust
the performance goals (including to prorate goals and payments for a partial Performance Period) in the event of, any of the following
events that occurs during a Performance Period: (a) asset write-downs, (b) litigation or claim judgments or settlements, (c) the effect
of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (d) any reorganization and restructuring
programs, (e) extraordinary nonrecurring items as described in applicable accounting provisions and/or in management’s discussion
and analysis of financial condition and results of operations appearing in the Company’s annual report for the applicable year,
(f) other nonrecurring events such as mergers, acquisitions, reorganizations, spinoffs or divestitures, (g) foreign exchange gains and
losses, (h) financing transactions and (i) such other occurrences as may be deemed appropriate by the Committee in its sole discretion.
ARTICLE 13
Dividend Equivalent Rights
Any Participant selected by the Committee may
be granted Dividend Equivalent Rights based on the dividends paid on Shares that are subject to any Award other than Options or SARs,
to be credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is exercised,
is settled, is paid, vests or expires, as determined by the Committee. Such Dividend Equivalent Rights shall be converted to cash or additional
Shares by such formula and at such time and subject to such limitations as may be determined by the Committee. Notwithstanding the foregoing,
Dividend Equivalent Rights that relate to Awards that vest or become payable or earned in whole or in part subject to performance goals
or conditions shall, to the extent made available under the terms of the Award, be subject to the same performance goals or conditions
as the underlying Award.
ARTICLE 14
Treatment on Change of Control
Upon the occurrence of a Change of Control, unless
otherwise provided in the Award Agreement, the Committee is authorized (but not obligated) to make adjustments in the terms and conditions
of outstanding Awards, including without limitation the following (or any combination thereof): (a) continuation or assumption of such
outstanding Awards under the Plan by the Company (if it is the surviving company or corporation) or by the surviving company or corporation
or its parent; (b) substitution by the surviving company or corporation or its parent of awards with substantially the same terms for
outstanding Awards (with appropriate adjustments to the type of consideration payable upon settlement of the Awards); (c) accelerated
exercisability, vesting and/or payment under outstanding Awards immediately prior to or upon the occurrence of such event or upon a termination
of employment or other service following such event; and (d) if all or substantially all of the Company’s outstanding Shares are
transferred in exchange for cash consideration in connection with such Change of Control: (i) upon written notice, provide that any outstanding
Options and SARs are exercisable during a reasonable period of time immediately prior to the scheduled consummation of the event or such
other reasonable period as determined by the Committee (contingent upon the consummation of the event), and at the end of such period,
such Options and SARs shall terminate to the extent not so exercised within the relevant period; and (ii) cancellation of all or any portion
of outstanding Awards for fair value (in the form of cash, shares, other property or any combination thereof) as determined in the sole
discretion of the Committee; provided, that, in the case of Options and SARs, the fair value may equal the excess, if any, of the value
of the consideration to be paid in the Change of Control transaction to holders of Shares (or, if no such consideration is paid, Fair
Market Value of the Shares subject to such outstanding Awards or portion thereof being canceled) over the aggregate exercise or base price,
as applicable, with respect to such Awards or portion thereof being canceled, or if no such excess, zero.
ARTICLE 15
Rights of Participants
15.1 Employment.
Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of the Company, its Affiliates, and/or its
Subsidiaries, to terminate any Participant’s employment or service at any time or for any reason not prohibited by law, nor confer
upon any Participant any right to continue his or her employment or other service for any specified period of time. Neither an Award nor
any benefits arising under this Plan shall constitute an employment contract with the Company, its Affiliates, and/or its Subsidiaries
and, accordingly, subject to Articles 3 and 16, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive
discretion of the Board without giving rise to any liability on the part of the Company, its Affiliates, and/or its Subsidiaries.
15.2 Participation.
No Eligible Individual shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected
to receive a future Award.
15.3 Rights
as a Shareholder. Except as otherwise provided herein, a Participant shall have none of the rights of a shareholder with respect to
Shares covered by any Award until the Participant becomes the record holder of such Shares.
ARTICLE 16
Amendment, Modification, Suspension, and
Termination
16.1 Amendment,
Modification, Suspension, and Termination. Subject to Section 16.3, the Board may, at any time and from time to time, alter, amend,
modify, suspend, or terminate this Plan and any Award Agreement in whole or in part; provided, however, that, without the prior approval
of the Company’s shareholders and except as provided in Section 4.3, (a) the Option Price of outstanding Options or the Grant Price
of outstanding SARs issued under this Plan will not be reduced; (b) at any time when the Option Price of outstanding Options or the Grant
Price of outstanding SARs is above the Fair Market Value of a Share, no alteration, amendment or modification shall provide that any such
outstanding Option or SAR be cancelled and regranted or exchanged for either cash or a new Award with a lower (or no) Exercise Price or
Grant Price; and (c) no other action shall be taken with respect to an Option or SAR that would be treated as a repricing under the rules
and regulations of the principal U.S. national securities exchange or securities market on which the Shares are listed or quoted. No material
amendment of this Plan shall be made without shareholder approval if shareholder approval is required by law, regulation, or stock exchange
rule.
16.2 Adjustment
of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Board may make adjustments in the terms and conditions
of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described
in Section 4.3 hereof) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations,
or accounting principles, whenever the Board determines that such adjustments are appropriate in order to prevent unintended dilution
or enlargement of the benefits or potential benefits intended to be made available under this Plan. The determination of the Board as
to the foregoing adjustments, if any, shall be conclusive and binding on Participants under this Plan.
16.3 Awards
Previously Granted. Notwithstanding any other provision of this Plan to the contrary (other than Section 16.4), no termination, amendment,
suspension, or modification of this Plan or an Award Agreement shall adversely affect in any material way any Award previously granted
under this Plan, without the written consent of the Participant holding such Award.
16.4 Amendment
to Conform to Law. Notwithstanding any other provision of this Plan to the contrary, the Board may amend the Plan or an Award Agreement,
to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Plan or an Award Agreement
to any present or future law relating to plans of this or similar nature (including, but not limited to, Section 409A), and to the administrative
regulations and rulings promulgated thereunder.
ARTICLE 17
General Provisions
17.1 Successors.
All obligations of the Company under this Plan with respect to Awards granted hereunder shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the Company.
17.2 Tax
Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company,
the minimum statutory amount to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld
with respect to any taxable event arising as a result of this Plan, or such other rate as may be approved without adverse accounting consequences.
17.3 Share
Withholding. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted
Shares and Restricted Share Units, or upon the achievement of performance goals related to Performance Shares or Performance Share Units,
or any other taxable event arising as a result of an Award granted hereunder, Participants may elect, subject to the approval of the Committee,
to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date
the tax is to be determined equal to the minimum statutory total tax that could be imposed on the transaction. All such elections shall
be irrevocable, made in writing (or electronically), and signed by the Participant, and shall be subject to any restrictions or limitations
that the Committee, in its sole discretion, deems appropriate.
17.4 Beneficiary
Designation. Each Participant under this Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently
or successively) to whom any benefit under this Plan is to be paid in case of the Participant’s death before the Participant receives
any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed
by the Committee, and will be effective only when filed by the Participant in writing with the Company during the Participant’s
lifetime. In the absence of any such beneficiary designation, benefits remaining unpaid or rights remaining unexercised at the Participant’s
death shall be paid or exercised by the Participant’s executor, administrator, or legal representative.
17.5 Legend.
The Shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer of such Shares.
17.6 Gender
and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural
shall include the singular, and the singular shall include the plural.
17.7 Severability.
In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
17.8 Requirements
of Law. The granting of Awards and the issuance of Shares under this Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities exchanges as may be required.
17.9 Delivery
of Title. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under this Plan prior to (a)
obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and (b) completion of any registration
or other qualification of the Shares under any applicable national or foreign law or ruling of any governmental body that the Company
determines to be necessary or advisable.
17.10 Inability
to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company’s counsel to be necessary or advisable to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have
been obtained.
17.11 Investment
Representations. The Committee may require any individual receiving Shares pursuant to an Award under this Plan to represent and warrant
in writing that the individual is acquiring the Shares for investment and without any present intention to sell or distribute such Shares.
17.12 Participants
Based Outside of the United States. Notwithstanding any provision of this Plan to the contrary, in order to comply with the laws in
countries other than the United States in which the Company and its Subsidiaries and Affiliates operate or engage persons who would otherwise
qualify as Eligible Individuals, the Committee, in its sole discretion, shall have the power and authority to:
(a) Determine
which Subsidiaries and Affiliates shall be covered by this Plan;
(b) Determine
which Employees, Directors and Consultants shall be eligible to participate in this Plan;
(c) Modify
the terms and conditions of any Award granted to Eligible Individuals outside the United States to comply with applicable non-U.S. laws;
(d) Establish
subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable under
applicable law, provided that any subplans and modifications to Plan terms and procedures established under this Section 17.12 shall be
attached to this Plan document as appendices; and
(e) Take
any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local governmental
regulatory exemptions or approvals.
Notwithstanding the above,
the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate applicable law.
17.13 Unfunded
Plan. Participants shall have no right, title, or interest whatsoever in or to any investments that the Company, and/or its Subsidiaries,
and/or its Affiliates may make to aid it in meeting its obligations under this Plan. Nothing contained in this Plan, and no action taken
pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company
and any Participant, beneficiary, legal representative, or any other individual. To the extent that any person acquires a right to receive
payments from the Company, its Subsidiaries, and/or its Affiliates under this Plan, such right shall be no greater than the right of an
unsecured general creditor of the Company, a Subsidiary, or an Affiliate, as the case may be. All payments to be made hereunder shall
be paid from the general funds of the Company, a Subsidiary, or an Affiliate, as the case may be and no special or separate fund shall
be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in this Plan.
17.14 No
Fractional Shares. No fractional Shares shall be issued or delivered pursuant to this Plan or any Award. The Committee shall determine
whether cash, Awards, or other property shall be issued or paid in lieu of fractional Shares or whether such fractional Shares or any
rights thereto shall be forfeited or otherwise eliminated.
17.15 Retirement
and Welfare Plans. Neither Awards made under this Plan nor Shares or cash paid pursuant to such Awards may be included as “compensation”
for purposes of computing the benefits payable to any Participant under the Company’s or any Subsidiary’s or Affiliate’s
retirement plans (both qualified and non-qualified) or welfare benefit plans unless such other plan expressly provides that such compensation
shall be taken into account in computing a Participant’s benefit.
17.16 Section
409A of the Internal Revenue Code.
(a) To
the maximum extent possible, it is intended that the Plan and all Awards hereunder are, and shall be, exempt from or otherwise comply
with the requirements of Section 409A, and that the Plan and all Award Agreements shall be interpreted and applied by the Committee in
a manner consistent with this intent in order to avoid the imposition of any taxes under Section 409A. In the event that any (i) provision
of the Plan or an Award Agreement, (ii) Award, payment or transaction or (iii) other action or arrangement contemplated by the provisions
of the Plan is determined by the Committee to not comply with the applicable requirements of Section 409A, the Committee shall have the
authority to take such actions and to make such changes to the Plan or an Award Agreement as the Committee deems necessary to comply with
such requirements.
(b) No
payment that constitutes deferred compensation under Section 409A that would otherwise be made under the Plan or an Award Agreement upon
a termination of service will be made or provided unless and until such termination is also a “separation from service,” as
determined in accordance with Section 409A. Notwithstanding the foregoing or anything elsewhere in the Plan or an Award Agreement to the
contrary, if a Participant is a “specified employee” as defined in Section 409A at the time of termination of service with
respect to an Award, then solely to the extent necessary to avoid the imposition of any additional tax under Section 409A, the commencement
of any payments or benefits under the Award shall be deferred until the date that is six months following the Participant’s termination
of service (or, if earlier, the date of death of the specified employee) and shall instead be paid (in a manner set forth in the Award
Agreement) on the payment date that immediately follows the end of such six-month period (or death) or as soon as administratively practicable
within thirty (30) days thereafter, but in no event later than the end of the applicable taxable year.
(c) In
no event whatsoever shall the Company be liable for any additional taxes, interest or penalties that may be imposed on a Participant by
Section 409A or any damages for failing to comply with Section 409A.
17.17 Nonexclusivity
of this Plan. The adoption of this Plan shall not be construed as creating any limitations on the power of the Committee to adopt
such other compensation arrangements as it may deem desirable for any Participant.
17.18 No
Constraint on Corporate Action. Nothing in this Plan shall be construed to: (a) limit, impair, or otherwise affect the Company’s
or a Subsidiary’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations, or changes of
its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business
or assets; or, (b) limit the right or power of the Company or a Subsidiary or an Affiliate to take any action which such entity deems
to be necessary or appropriate.
17.19 Governing
Law. The Plan and each Award Agreement shall be governed by the laws of the State of Delaware, excluding any conflicts or choice of
law rule or principle that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction.
Unless otherwise provided in the Award Agreement, recipients of an Award under this Plan are deemed to submit to the exclusive jurisdiction
and venue of the federal or state courts of Delaware, to resolve any and all issues that may arise out of or relate to this Plan or any
related Award Agreement.
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