Item 1.01 Entry into a Material Definitive Agreement.
As previous reported
in the Current Report on Form 8-K filed by DPW Holdings, Inc. (the “Company”)
on July 2, 2019, the Company entered into an exchange agreement with a certain institutional investor (the “Investor”)
pursuant to which, in exchange for that certain Term Promissory Note issued by the Company to the Investor on September 21, 2018,
the Company sold to the Investor a new convertible promissory note in the principal amount of $783,031.14 with an interest rate
of 12% per annum (the “Old Note”).
On September 26,
2019 (the “Closing Date”), the Company entered into a second Exchange Agreement (the “Exchange Agreement”)
with the Investor pursuant to which, in exchange for Old Note, the Company sold to the Investor a new convertible promissory note
in the principal amount of $815,218.02 with an interest rate of 12% per annum (the “New Note”). Subject to the
approval by the NYSE American, the New Note shall be convertible into shares of common stock, par value $0.001 per share (the “Conversion
Shares”), commencing on October 31, 2019, at conversion price equal to $4.00 (the “Conversion Price”).
In connection with the Exchange Agreement, the Company and the Investor entered into a Forbearance Agreement (the “Forbearance
Agreement”) pursuant to which the Investor agreed to forebear through the close of business on October 31, 2019, from
exercising the rights and remedies it is entitled to under the Old Note, and any and all transaction documents related thereto,
in consideration for the Company’s agreement to issue the New Note.
Pursuant to an
amended and restated registration rights agreement by and between the Company and the Investor (the “RRA”),
the Company shall file with the Securities and Exchange Commission (the “SEC”) an amended registration statement
on Form S-3 under the Securities Act of 1933, as amended (the “Securities Act”), relating to the resale by the
Investor of all (or such other number as the SEC will permit) of the Conversion Shares no later than October 21, 2019.
Description of Convertible Promissory
Note
The New Note has
a principal face amount of $815,218.02 with an interest rate of 12% per annum and a maturity date of December 31, 2019. Commencing
on October 31, 2019, the New Note shall be convertible into such number of shares of Common Stock issuable determined by dividing
the principal amount of the New Note, subject to adjustments as provided in the Exchange Agreement, by the Conversion Price. The
New Note contains standard and customary events of default including, but not limited to, failure to make payments when due under
the New Note, failure to comply with certain covenants contained in the New Note, or bankruptcy or insolvency of the Company.
If at any time
after the Closing Date, the closing price of the shares of Common Stock for any 3 consecutive Trading Days equals or exceeds $7.00
(subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions
of the Common Stock that occur after the Closing Date, the “Forced Conversion Price”), the Company may, within
1 trading day of the end of any such period, deliver a notice to the Investor to cause the Investor to immediately convert all
or part of the then outstanding principal amount of Note at the Forced Conversion Price.
After the occurrence
of any Event of Default (as defined in the New Note) that results in the eventual acceleration of the New Note, the interest rate
on the New Note shall accrue at an additional interest rate equal to the lesser of 18.0% per annum or the maximum rate permitted
under applicable law, shall be compounded daily, and shall be due and payable on the first Trading Day of each calendar month during
the continuance of such Event of Default.
The Conversion
Shares were offered and sold to the Investor in reliance upon exemption from the registration requirements under Section 3(a)(9)
under the Securities Act of 1933, as amended.
The foregoing
is only brief description of the material terms of the Exchange Agreement, the New Note, the RRA and the Forbearance Agreement,
the forms of which are attached hereto as exhibits to this Current Report on Form 8-K and are incorporated herein by reference.
The foregoing does not purport to be a complete description of the rights and obligations of the parties thereunder and such descriptions
are qualified in their entirety by reference to the respective exhibit.