SECURITIES SUBSCRIPTION AGREEMENT

 

 

As of _______, 2016

SQL Technologies Corp.

4400 North Point Parkway, Suite 154

Alpharetta, GA 30022

 

Investors:

 

1.1. Subscription; Payment.

 

(a)       The undersigned subscriber (the “Subscriber”) hereby irrevocably
subscribes for and agrees to purchase from SQL Technologies Corp., a Florida
corporation (the “Company”), (i) up to ______ shares of the Company’s common
stock, no par value per share (“Common Stock”), at USD $2.60 per share as set
forth on the signature page hereto, (ii) a 90-day option to purchase up to the
same number of shares of Common Stock purchased by the Subscriber in the
Closing, at an exercise price of $2.60 per share, the form of which is attached
as Exhibit A hereto, (iii) three-year warrants to purchase shares of Common
Stock at an exercise price of USD $3.00 to $3.50 per share, depending on the
date of exercise, the form of which is attached as Exhibit B hereto, and (iv)
the right to obtain Volume Warrants (as defined below), upon the terms and
conditions set forth in Section 5 hereto (collectively, the “Securities”),
pursuant to the terms set forth in the Confidential Term Sheet and this
Securities Subscription Agreement (this “Transaction”). This Securities
Subscription Agreement, which incorporates by reference all exhibits and
schedules attached to the Investor Package issued in connection with the
Investor Package dated August 2016, shall be hereinafter referred to as the
“Subscription Agreement”; together with such exhibits and schedules attached
hereto, the “Sale Documents”. Any capitalized term not defined herein shall have
the meaning of such term as has been set forth in the Sale Documents. The
minimum investment per Subscriber shall be $25,000, which may be waived by the
Company in its sole discretion. All amounts in this Subscription Agreement are
expressed in US Dollars.

 

This subscription for the Securities is based upon the information provided in
the Sale Documents and upon the Subscriber’s own investigation as to the merits
and risks of this investment. The Subscriber shall deliver herewith duly
executed copies of the signature pages to this Subscription Agreement and the
Accredited Investor Questionnaire & Form W-9 (the “Investor Questionnaire”)
provided by the Company to the Subscriber.

 

It is currently anticipated that the closing of the Transaction will take place
on or around August ___, 2016 (the “Closing” and the date upon which a Closing
occurs, the “Closing Date”), unless otherwise extended or modified by the
Company in its sole discretion.

 

(b)       Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the Company the
number of shares of Common Stock set forth on the signature page hereto (the
“Shares”), at a purchase price of Two and Six Tenths US Dollars (USD $2.60) per
share of Common Stock (the “Purchase Price”). When this Subscription Agreement
is accepted and executed by the Company, the Company agrees to issue the
Securities to the Subscriber. The Purchase Price is payable by wire transfer to
Citibank, New York, NY for SQL Technologies Corp. for pursuant to the following
wire instructions.

 

WIRING INSTRUCTIONS

[REDACTED]

 

Provided that (i) the Subscriber has satisfied all conditions set forth herein
and (ii) the Company has accepted and executed this Subscription Agreement, the
Securities purchased by the Subscriber will be delivered to the Subscriber by
the Company promptly following the Closing Date. In the event that a Closing
does not occur, Subscriber’s funds will be returned by the Company to the
Subscriber.

 

 

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2.                  Subscriber Representations, Warranties and Agreements. The
Subscriber hereby acknowledges, represents and warrants as follows (with the
understanding that the Company will rely on such representations and warranties
in determining, among other matters, the suitability of this investment for the
Subscriber in order to comply with federal and state securities laws):

 

(a)       In connection with this subscription, the Subscriber has read this
Subscription Agreement. The Subscriber acknowledges that this Subscription
Agreement is not intended to set forth all of the information which might be
deemed pertinent by an investor who is considering an investment in the
Securities. It is the responsibility of the Subscriber (i) to determine what
additional information he desires to obtain in evaluating this investment, and
(ii) to obtain such information from the Company.

 

(b)       This Transaction is limited to persons who are “accredited investors,”
as that term is defined in RULE 501 OF Regulation D under the 1933, as amended
(the “Act”), and who have the financial means and the business, financial and
investment experience and acumen to conduct an investigation as to, and to
evaluate, the merits and risks of this investment. The Subscriber hereby
represents that he has read, is familiar with and understands Rule 501 of
Regulation D under the Act. The Subscriber is an “accredited investor” as
defined in Rule 501(a) of Regulation D UNDER THE ACT.

 

(c)       The Subscriber has had full access to all the information which the
Subscriber (or the Subscriber’s advisor(s)) considers necessary or appropriate
to make an informed decision with respect to the Subscriber’s investment in the
Securities. The Subscriber acknowledges that the Company has made available to
the Subscriber and the Subscriber’s advisors the opportunity to examine and copy
any contract, matter or information which the Subscriber considers relevant or
appropriate in connection with this investment and to ask questions and receive
answers relating to any such matters including, without limitation, the
financial condition, management, employees, business, obligation, corporate
books and records, budgets, business plans of and other matters relevant to the
Company. To the extent the Subscriber has not sought information regarding any
particular matter, the Subscriber represents that he or she had and has no
interest in doing so and that such matters are not material to the Subscriber in
connection with this investment. The Subscriber has accepted the responsibility
for conducting the Subscriber’s own investigation and obtaining for itself such
information as to the foregoing and all other subjects as the Subscriber deems
relevant or appropriate in connection with this investment. The Subscriber is
not relying on any representation or warranty other than that contained herein.
The Subscriber acknowledges that no representation regarding projected revenues
or a projected rate of return has been made to it by any party.

 

(d)       The Subscriber understands that this Transaction has not been
registered under the Act, in reliance on an exemption for private offerings
provided pursuant to Section 4(2) of the Act and that, as a result, the
Securities will be “restricted securities” as that term is defined in Rule 144
under the Act and, accordingly, under Rule 144 as currently in effect, that the
Securities must be held for at least one (1) year after the investment has been
made (or indefinitely if the Subscriber is deemed an “affiliate” within the
meaning of such rule) unless the Securities are subsequently registered under
the Act and qualified under any other applicable securities law or exemptions
from such registration. The Subscriber further understands that this Transaction
has not been qualified or registered under any foreign or state securities laws
in reliance upon the representations made and information furnished by the
Subscriber herein and any other documents delivered by the Subscriber in
connection with this Subscription Agreement; that this Transaction has not been
reviewed by the U.S. Securities and Exchange Commission or by any foreign or
state securities authorities; that the Subscriber’s rights to transfer the
Securities will be restricted, which includes restrictions against transfers
unless the transfer is not in violation of the Act and applicable state
securities laws (including investor suitability standards); and that the Company
may in its sole discretion require the Subscriber to provide at Subscriber’s own
expense an opinion of its counsel to the effect that any proposed transfer is
not in violation of the Act or any state securities laws.

 

 

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(e)       The Subscriber is an “accredited investor” as that term is defined in
Rule 501(a) of Regulation D under the 1933 Act. The Subscriber has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the purchase of the Common Stock. The
Subscriber is not registered as a broker or dealer under Section 15(a) of the
Securities Exchange Act of 1934, as amended, affiliated with any broker or
dealer registered under Section 15(a) of the Securities Exchange Act of 1934, as
amended, or a member of the Financial Industry Regulatory Authority.

 

(f)       This Subscription Agreement and the Sale Documents have been duly and
validly authorized, executed and delivered on behalf of the Subscriber and is a
valid and binding agreement of the Subscriber enforceable against the Subscriber
in accordance with their terms, subject as to enforceability to general
principles of equity and to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors’ rights and remedies. The
Subscriber has the requisite corporate power and authority to enter into and
perform its obligations under this Subscription Agreement and the Sale
Documents, and each other agreement entered into by the parties hereto, in
connection with the transactions contemplated by this Subscription Agreement.

 

(g)       The execution, delivery and performance of this Subscription Agreement
and the Sale Documents by the Subscriber and the consummation by the Subscriber
of the transactions contemplated hereby and thereby will not (i) result in a
violation of the articles of incorporation, by-laws or other documents of
organization of the Subscriber, (ii) conflict with, or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, or give others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Subscriber
is bound, or (iii) result in a violation of any law, rule, regulation or decree
applicable to the Subscriber.

 

(h)       The Subscriber understands that the Securities are being offered and
sold in reliance on a transactional exemption from the registration requirements
of federal and state securities laws and that the Company is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Subscriber set forth herein in order
to determine the applicability of such exemptions and the suitability of the
Subscriber to acquire the Securities.

 

(i)       The Subscriber acknowledges that there will be no market for the
Securities and that the Subscriber may not be able to sell or dispose of them;
the Subscriber has liquid assets sufficient to assure that the purchase price of
the Securities will cause no undue financial difficulties and that, after
purchasing the Securities the Subscriber will be able to provide for any
foreseeable current needs and possible personal contingencies; the Subscriber is
able to bear the risk of illiquidity and the risk of a complete loss of this
investment.

 

(j)       The information in any documents delivered by the Subscriber in
connection with this subscription, including, but not limited to the Investor
Questionnaire, is true, correct and complete in all respects as of the date
hereof. The Subscriber agrees promptly to notify the Company in writing of any
change in such information after the date hereof.

 

(k)       This Transaction and sale of the Securities to the Subscriber were not
made through any advertisement in printed media of general and regular paid
circulation, radio or television or any other form of advertisement, or as part
of a general solicitation.

 

 

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(l)       The Subscriber recognizes that an investment in the Securities
involves significant risks, which risks could give rise to the loss of the
Subscriber’s entire investment in such securities.

 

(m)       The Subscriber is purchasing the Securities for the Subscriber’s own
account, with the intention of holding the Securities, with no present intention
of dividing or allowing others to participate in this investment or of reselling
or otherwise participating, directly or indirectly, in a distribution of the
Securities, and shall not make any sale, transfer, or pledge thereof without
registration under the Act and any applicable securities laws of any state or
unless an exemption from registration is available under those laws.

 

(n)       The Subscriber represents that the Subscriber, if an individual, has
adequate means of providing for his or her current needs and personal and family
contingencies and has no need for liquidity in this investment in the
Securities. The Subscriber has no reason to anticipate any material change in
his or her personal financial condition for the foreseeable future.

 

(o)       The Subscriber is financially able to bear the economic risk of this
investment, including the ability to hold the Securities indefinitely or to
afford a complete loss of the Subscriber’s investment in the Securities.

 

(p)        If the Subscriber is a partnership, corporation, trust, or other
entity, (i) the Subscriber has enclosed with this Subscription Agreement
appropriate evidence of the authority of the individual executing this
Subscription Agreement to act on its behalf (e.g., if a trust, a certified copy
of the trust agreement; if a corporation, a certified corporate resolution
authorizing the signature and a certified copy of the certificate of
incorporation; or if a partnership, a certified copy of the partnership
agreement), (ii) the Subscriber represents and warrants that it was not
organized or reorganized for the specific purpose of acquiring the Securities,
(iii) the Subscriber has the full power and authority to execute this
Subscription Agreement on behalf of such entity and to make the representations
and warranties made herein on its behalf, and (iv) this investment in the
Company has been affirmatively authorized, if required, by the governing board
of such entity and is not prohibited by the governing documents of the entity.

 

3.                  Representations and Warrants of the Company. As a material
inducement of the Subscriber to enter into this Subscription Agreement and
subscribe for the Securities, the Company represents and warrants to the
Subscriber, as of the date hereof, as follows:

 

(a)       Organization and Standing. The Company is a duly organized
corporation, validly existing and in good standing under the laws of the State
of Florida, has full power to carry on its business as and where such business
is now being conducted and to own, lease and operate the properties and assets
now owned or operated by it and is duly qualified to do business and is in good
standing in each jurisdiction where the conduct of its business or the ownership
of its properties requires such qualification except where the failure to be so
qualified would not have a Material Adverse Effect. “Material Adverse Effect”
means any circumstance, change in, or effect on the Company that, individually
or in the aggregate with any other similar circumstances, changes in, or effects
on, the Company taken as a whole: (i) is, or is reasonably expected to be,
materially adverse to the business, operations, assets, liabilities, employee
relationships, customer or supplier relationships, prospects, results of
operations or the condition (financial or otherwise) of the Company taken as a
whole, or (ii) is reasonably expected to adversely affect the ability of the
Company to operate or conduct the Company’s business in the manner in which it
is currently operated or conducted or proposed to be operated or conducted by
the Company.

 

(b)       Authority. The execution, delivery and performance of this
Subscription Agreement and the other Sale Documents by the Company and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by the Board of Directors of the Company.

 

 

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(c)       No Conflict. The execution, delivery and performance of this
Subscription Agreement and the other Sale Documents, and the consummation of the
transactions contemplated hereby and thereby do not (i) violate or conflict with
the Company’s Articles of Incorporation, By-laws or other organizational
documents, (ii) conflict with or result (with the lapse of time or giving of
notice or both) in a material breach or default under any material agreement or
instrument to which the Company is a party or by which the Company is otherwise
bound, or (iii) violate any order, judgment, law, statute, rule or regulation
applicable to the Company, except where such violation, conflict or breach would
not have a Material Adverse Effect. This Subscription Agreement and the Sale
Documents when executed by the Company will be a legal, valid and binding
obligation of the Company enforceable in accordance with its terms (except as
may be limited by bankruptcy, insolvency, reorganization, moratorium and similar
laws and equitable principles relating to or limiting creditors’ rights
generally).

 

(d)       Authorization. Issuance of the Securities to the Subscriber has been
duly authorized by all appropriate corporate actions of the Company.

 

(e)       Litigation and Other Proceedings. There are no actions, suits,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company at law or in equity before or by any court or
federal, state, municipal or their governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign which could materially
adversely affect the Company. The Company is not subject to any continuing
order, writ, injunction or decree of any court or agency against it which would
have a material adverse effect on the Company.

 

(f)       Use of Proceeds. The proceeds of this Transaction and sale of the
Securities, net of payment of placement expenses, will be used by the Company
for working capital and other general corporate purposes subject to the
restrictions set forth in the Securities and on Schedule 1 of the Investor
Package.

 

(g)       Consents/Approvals. No consents, filings (other than federal and state
securities filings relating to the issuance of the Securities pursuant to
applicable exemptions from registration, which the Company hereby undertakes to
make in a timely fashion), authorizations or other actions of any governmental
authority are required to be obtained or made by the Company for the Company’s
execution, delivery and performance of this Subscription Agreement which have
not already been obtained or made or will be made in a timely manner following
the Closing.

 

(h)       No Commissions. The Company has not incurred any obligation for any
finder’s, broker’s or agent’s fees or commissions in connection with the
transaction contemplated hereby.

 

(i)       Capitalization. A capitalization table illustrating the authorized and
the outstanding capital stock of the Company as of the date of the Investor
Package is attached as Schedule 2 of the Investor Package. All of such
outstanding shares have been, or upon issuance will be, validly issued, fully
paid and nonassessable. As of the date of the Investor Package, except as
disclosed in Schedule 2.2 of the Investor Package or pursuant to any other
issuance of Securities in this Transaction, (i) no shares of the Company’s
capital stock are subject to preemptive rights or any other similar rights or
any liens or encumbrances suffered or permitted by the Company; (ii) there are
no outstanding debt securities; (iii) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries; (iv) there are no outstanding securities of
the Company or any of its subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may become
bound to redeem a security of the Company or any of its subsidiaries; and (v)
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities. The Company
will furnish to the Subscriber upon request, true and correct copies of the
Company’s Articles of Incorporation, as amended and as in effect on the date
hereof (the “Articles of Incorporation”), and the Company’s By-laws, as in
effect on the date hereof (the “By-laws”) attached hereto as Schedule 5 of the
Investor Package, and the terms of all securities convertible or exchangeable
into or exercisable for Common Stock and the material rights of the holders
thereof in respect thereto. Schedule 2.1 of the Investor Package hereto also
lists all outstanding debt of the Company for borrowed money.

 

 

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(j)       Employee Relations. Neither the Company nor any of its subsidiaries is
involved in any labor dispute nor, to the knowledge of the Company or any of its
subsidiaries, is any such dispute threatened, the effect of which would be
reasonably likely to result in a Material Adverse Effect. Neither the Company
nor any of its subsidiaries is a party to a collective bargaining agreement.

 

(k)       Intellectual Property Rights. The Company and its subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted. The Company and its subsidiaries do not have any knowledge of any
infringement by the Company or its subsidiaries of trademark, trade name rights,
patents, patent rights, copyrights, inventions, licenses, service names, service
marks, service mark registrations, trade secret or other similar rights of
others, or of any such development of similar or identical trade secrets or
technical information by others and, except as set forth on Schedule 3 of the
Investor Package, there is no claim, action or proceeding being made or brought
against, or to the Company’s knowledge, being threatened against, the Company or
its subsidiaries regarding trademarks, trade name rights, patents, patent
rights, inventions, copyrights, licenses, service names, service marks, service
mark registrations, trade secrets or other infringement.

 

(l)       Environmental Laws. The Company and its subsidiaries (i) are to the
Company’s knowledge in compliance with any and all applicable foreign, federal,
state and local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants (“Environmental Laws”), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses, and (iii) are in
compliance with all terms and conditions of any such permit, license or approval
where such noncompliance or failure to receive permits, licenses or approvals
referred to in clauses (i), (ii) or (iii) above would be reasonably likely to
result in a Material Adverse Effect.

 

(m)       Disclosure. No representation or warranty by the Company in this
Subscription Agreement, the other Sale Documents, nor in any certificate,
schedule or exhibit delivered or to be delivered pursuant to this Subscription
Agreement or the other Sale Documents contains or will contain any untrue
statement of material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading. To
the knowledge of the Company and its subsidiaries at the time of the execution
of this Subscription Agreement, there is no information concerning the Company
and its subsidiaries or their respective businesses which has not heretofore
been disclosed to the Subscribers that would have a Material Adverse Effect.

 

(n)       Title. 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 such as are described in Schedule 2.1 of the Investor Package or such as
do not materially and adversely affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company or any of its subsidiaries. Any real property and facilities held under
lease by the Company or any of its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries.

 

 

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(o)       Foreign Corrupt Practices Act. To the Company’s knowledge, neither the
Company, nor any director, officer, agent, employee or other person acting on
behalf of the Company or any subsidiary has, in the course of acting for, or on
behalf of, the Company, directly or indirectly used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; directly or indirectly 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 any similar treaties of
the United States; or directly or indirectly made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government or party official or employee.

 

(p)       Tax Status. The Company and each of its subsidiaries has made or filed
all United States federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject and all
such returns, reports and declarations are true, correct and accurate in all
material respects. The Company has paid all taxes and other governmental
assessments and charges, shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith, for which adequate
reserves have been established, in accordance with generally accepted accounting
principles.

 

(q)       Compliance with Laws. The business of the Company and its subsidiaries
has been and is presently being conducted so as to comply with all applicable
material federal, state and local governmental laws, rules, regulations and
ordinances.

 

(r)       Employee Benefit Plans; ERISA. Schedule 4 of the Investor Package sets
forth a true, correct and complete list of all employee benefit plans, programs,
policies and arrangements, whether written or unwritten (the “Company Plans”),
that the Company, any subsidiary or any other corporation or business which is
now or at the relevant time was a member of a controlled group of companies or
trades or businesses including the Company or any subsidiary, within the meaning
of section 414 of the Internal Revenue Code of 1986, as amended (the “Code”),
maintain or have maintained on behalf of current or former members, partners,
principals, directors, officers, managers, employees, consultants or other
personnel. (i) There has been no prohibited transaction within the meaning of
Section 406 of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), or Section 4975 of the Code, with respect to any of the Company
Plans; (ii) none of the Company Plans is or was subject to Section 412 of the
Code or Section 302 or Title IV of ERISA; and (iii) each of the Company Plans
has been operated and administered in all material respects in accordance with
all applicable laws, including ERISA. There are no actions, suits or claims
pending or threatened (other than routine claims for benefits), whether by
participants, the Internal Revenue Service, the Department of Labor or
otherwise, with respect to any Company Plan and no facts exist under which any
such actions, suits or claims are likely to be brought or under which the
Company or any subsidiary could incur any liability with respect to a Company
Plan other than in the ordinary course. None of the Company Plans is or was a
multiemployer plan within the meaning of Section 3(37) of ERISA. Neither the
Company nor any subsidiary has announced, proposed or agreed to any change in
benefits under any Company Plan or the establishment of any new Company Plan.
There have been no changes in the operation or interpretation of any Company
Plan since the most recent annual report, which would have any material effect
on the cost of operating, maintaining or providing benefits under such Company
Plan. Neither the Company nor any subsidiary has incurred any liability for the
misclassification of employees as leased employees or independent contractors.
Except as provided for in this Subscription Agreement and in the other Sale
Documents, the consummation of the transactions contemplated by this
Subscription Agreement, either alone or in combination with another event, will
not (A) result in any individual becoming entitled to any increase in the amount
of compensation or benefits or any additional payment from the Company or any
subsidiary (including, without limitation, severance, golden parachute or bonus
payments or otherwise), or (B) accelerate the vesting or timing of payment of
any benefits or compensation payable in respect of any individual.

(s)       Restrictions on Business Activities. There is no judgment, order,
decree, writ or injunction binding upon the Company or any subsidiary or, to the
knowledge of the Company or any subsidiary, threatened that has or could
prohibit or impair the conduct of their respective businesses as currently
conducted or any business practice of the Company or any subsidiary, including
the acquisition of property, the provision of services, the hiring of employees
or the solicitation of clients, in each case either individually or in the
aggregate.

 

4.                  Legends. The Subscriber understands and agrees that the
Company will cause any necessary legends in addition to representations to be
placed upon the Securities, together with any other legend that may be required
by federal or state securities laws or deemed necessary or desirable by the
Company, in the form substantially as follows:

 

 

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THE SECURITIES WHICH ARE REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL A REGISTRATION STATEMENT WITH
RESPECT THERETO IS DECLARED EFFECTIVE UNDER SUCH ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT IS AVAILABLE.

 

5.                  Volume Warrants. The Subscriber and the Company hereby agree
to the terms and conditions for volume common stock purchase warrants (the
“Volume Warrants”), as more fully set forth on Exhibit C hereto.

 

6.                  General Provisions.

 

(a)                Confidentiality. The Subscriber covenants and agrees that it
will keep confidential and will not disclose or divulge any confidential or
proprietary information that such Subscriber may obtain from the Company
pursuant to financial statements, reports, and other materials submitted by the
Company to such Subscriber in connection with this Transaction or as a result of
discussions with or inquiry made to the Company, unless such information is
known, or until such information becomes known, to the public through no action
by the Subscriber; provided, however, that a Subscriber may disclose such
information to its attorneys, accountants, consultants, and other professionals
to the extent necessary in connection with his or her investment in the Company
so long as any such professional to whom such information is disclosed is made
aware of the Subscriber’s obligations hereunder and such professional agrees to
be likewise bound as though such professional were a party hereto.

 

(b)               Successors. The covenants, representations and warranties
contained in this Subscription Agreement shall be binding on the Subscriber’s
and the Company’s heirs and legal representatives and shall inure to the benefit
of the respective successors and assigns of the Company. The rights and
obligations of this Subscription Agreement may not be assigned by any party
without the prior written consent of the other party.

 

(c)                Counterparts. This Subscription Agreement may be executed in
counterparts, each of which shall be deemed an original agreement, but all of
which together shall constitute one and the same instrument.

 

(d)               Execution by Facsimile or Email. Execution and delivery of
this Subscription Agreement by facsimile transmission or email (including the
delivery of documents in Adobe PDF format or other machine-readable electronic
format) shall constitute execution and delivery of this Subscription Agreement
for all purposes, with the same force and effect as execution and delivery of an
original manually signed copy hereof.

 

(e)                Governing Law and Jurisdiction. This Subscription Agreement
shall be governed by and construed in accordance with the laws of the State of
Florida applicable to contracts to be wholly performed within such state and
without regard to conflicts of law provisions that would result in the
application of any laws other than the laws of the State of Florida. Any legal
action or proceeding arising out of or relating to this Subscription Agreement
and/or the other Sale Documents may be instituted in the courts of the State of
Georgia sitting in Fulton County or in the United States District Court for the
Northern District of Georgia, and the parties hereto irrevocably submit to the
jurisdiction of each such court in any action or proceeding. Subscriber hereby
irrevocably waives and agrees not to assert, by way of motion, as a defense, or
otherwise, in every suit, action or other proceeding arising out of or based on
this Subscription Agreement and/or the other Sale Documents and brought in any
such court, any claim that Subscriber is not subject personally to the
jurisdiction of the above named courts, that Subscriber’s property is exempt or
immune from attachment or execution, that the suit, action or proceeding is
brought in an inconvenient forum or that the venue of the suit, action or
proceeding is improper.

 

(f)                Indemnification Generally.

 

 

8

 

 

(i)                 The Company, on the one hand, and the Subscriber, on the
other hand (each an “Indemnifying Party”), shall indemnify the other from and
against any and all losses, damages, liabilities, claims, charges, actions,
proceedings, demands, judgments, settlement costs and expenses of any nature
whatsoever (including, without limitation, reasonable attorneys’ fees and
expenses) resulting from any breach of a representation and warranty, covenant
or agreement by the Indemnifying Party and all claims, charges, actions or
proceedings incident to or arising out of the foregoing.

 

(ii)               Indemnification Procedures. Each person entitled to
indemnification under this Section 5 (an “Indemnified Party”) shall give notice
as promptly as reasonably practicable to each party required to provide
indemnification under this Section 5 of any action commenced against or by it in
respect of which indemnity may be sought hereunder, but failure to so notify an
Indemnifying Party shall not release such Indemnifying Party from any liability
that it may have, otherwise than on account of this indemnity agreement so long
as such failure shall not have materially prejudiced the position of the
Indemnifying Party. Upon such notification, the Indemnifying Party shall assume
the defense of such action if it is a claim brought by a third party, and, if
and after such assumption, the Indemnifying Party shall not be entitled to
reimbursement of any expenses incurred by it in connection with such action
except as described below. In any such action, any Indemnified Party shall have
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (A) the Indemnifying
Party and the Indemnified Party shall have mutually agreed to the contrary, or
(B) the named parties in any such action (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party and representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing or conflicting interests between them. The Indemnifying
Party shall not be liable for any settlement of any proceeding effected without
its written consent (which shall not be unreasonably withheld or delayed by such
Indemnifying Party), but if settled with such consent or if there be final
judgment for the plaintiff, the Indemnifying Party shall indemnify the
Indemnified Party from and against any loss, damage or liability by reason of
such settlement or judgment.

 

(g)               Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing and shall be delivered by certified
or registered mail (first class postage pre-paid), guaranteed overnight
delivery, or facsimile transmission if such transmission is confirmed by
delivery by certified or registered mail (first class postage pre-paid) or
guaranteed overnight delivery, to the following addresses and facsimile numbers
(or to such other addresses or facsimile numbers which such party shall
subsequently designate in writing to the other party):

 

(i)       if to the Company:

[REDACTED]

 

with a copy to:

[REDACTED]

 

(ii)       If to Subscriber, to the address set forth next to its name on the
signature page hereto.

 

(h)               Entire Agreement. This Subscription Agreement (including the
exhibits attached hereto) and other Sale Documents delivered at the Closing
pursuant hereto, contain the entire understanding of the parties in respect of
its subject matter and supersedes all prior agreements and understandings
between or among the parties with respect to such subject matter. The exhibits
constitute a part hereof as though set forth in full above.

 

 

9

 

 

(i)                 Amendment; Waiver. This Subscription Agreement may not be
modified, amended, supplemented, canceled or discharged, except by written
instrument executed by both parties. No failure to exercise and no delay in
exercising, any right, power or privilege under this Subscription Agreement
shall operate as a waiver, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude the exercise of any other right,
power or privilege. No waiver of any breach of any provision shall be deemed to
be a waiver of any proceeding or succeeding breach of the same or any other
provision, nor shall any waiver be implied from any course of dealing between
the parties. No extension of time for performance of any obligations or other
acts hereunder or under any other agreement shall be deemed to be an extension
of the time for performance of any other obligations or any other acts. The
rights and remedies of the parties under this Subscription Agreement are in
addition to all other rights and remedies, at law or equity, that they may have
against each other.

 

 

[Signature Page Follows]

 

10

 

 

  

INFORMATION IN RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY CONFIDENTIAL 

 

THIS SECTION WILL BE KEPT STRICTLY CONFIDENTIAL

 

OMNIBUS SIGNATURE PAGE TO THE SUBSCRIPTION AGREEMENT

TO PURCHASE SAFETY QUICK LIGHTING & FAN CORP.’S COMMON STOCK

 

DOLLAR AMOUNT INVESTED: US $ ____________________________

 

NUMBER OF SHARES SUBSCRIBED FOR: ____________________________

 

AMOUNT INVESTED TO BE SENT VIA: [ ] Check (enclosed) [ ] Wire

 

 

NAME IN WHICH THE SECURITIES SHOULD BE ISSUED:

  

_________________________________________________________________________________________________

SUBSCRIBER ADDRESS INFORMATION:

For individual subscribers this address should be the Subscriber’s primary legal
residence. For entities other than individual subscribers, please provide
address information for the entities primary place of business.

 

      Legal Address   Copy To       City, State and Zip Code   Legal Address    
  Tax ID (EIN, SSN, OR ITIN)   City, State and Zip Code       Telephone Number /
Facsimile Number   Telephone Number / Facsimile Number       Email Address  
Email Address

 

ALTERNATE ADDRESS INFORMATION:

Please enter an alternate address if you wish to receive correspondence at an
address other than the address listed above.

 

      Alternative Address for Correspondence   Alternative Address for
Correspondence       City, State and Zip Code   City, State and Zip Code      
Other (telephone, fax, email)   Other (telephone, fax, email)

 

AGREED AND SUBSCRIBED   AGREED AND SUBSCRIBED           Date:   Date:  
Subscriber:       By:   SQL TECHNOLOGIES CORP   Name:       Title:   By:        
John P. Campi       Chief Executive Officer

 

11

 

 

CERTIFICATE OF SIGNATORY

 

(To be completed if the Securities are

being subscribed for by an entity)

 

 

I, , am the_______________________________ of (the “Entity”).

 

I certify that I am empowered and duly authorized by the Entity to execute and
carry out the terms of the Securities Subscription Agreement and to purchase and
hold the Securities, and certify further that the Securities Subscription
Agreement has been duly and validly executed on behalf of the Entity and
constitutes a legal and binding obligation of the Entity.

 

IN WITNESS WHEREOF, I have set my hand this ____ day of __________, 2016.

 

 

______________________________________

(Signature)

 

 

12

 

 

 

Exhibit A

 

STOCK OPTION AGREEMENT

 

TO PURCHASE UP TO 30,000 SHARES OF COMMON STOCK

OF SQL TECHNOLOGIES CORP.

 

THIS STOCK OPTION AGREEMENT (this “Agreement”) is made as of August ___, 2016
(the “Effective Date”) by and between SQL TECHNOLOGIES CORP, a Florida
corporation (the “Company”), and _______ (the “Optionee”).

 

WHEREAS, the Optionee subscribed for (i) up to 30,000 shares of the Company’s
common stock, no par value per share (“Common Stock”), (ii) a 90-day option to
purchase up to the same number of shares of Common Stock purchased by the
Subscriber in the closing of the Transaction, (iii) three-year warrants to
purchase shares of Common Stock, and (iv) the right to obtain certain volume
warrants (collectively, the “Securities”), pursuant to the terms set forth in a
Securities Subscription Agreement dated as of the date hereof (the “Subscription
Agreement”, together with the Company’s Investor Package dated August 2016 and
distributed to Optionee, the “Sale Documents”). Any capitalized term not defined
herein shall have the meaning of such term as has been set forth in the Sale
Documents.

 

1.       Grant of Option. Subject to the terms and conditions set forth in this
Agreement, the Company hereby grants to the Optionee the option, whereby the
Optionee shall have the right purchase from the Company, during the period set
forth in Section 2, up to thirty thousand (30,000) shares of Common Stock
(“Option Shares”) at an exercise price of US $2.60 (two dollars and sixty cents
US) (the “Exercise Price”, and such right to purchase the Option Shares at the
Exercise Price, the “Option”).

 

2.       Term. This Agreement and the Option shall be forfeited and terminate
automatically, without further action or notice, on the ninety (90) day
anniversary of the Effective Date (the “Expiration Date”). The right to purchase
the Option Shares under the Option shall vest to the Optionee immediately.
Notwithstanding any other provision of this Agreement, the Option shall not vest
or be exercisable if the exercise thereof would result in a violation of any
applicable federal or state securities law.

 

3.       Exercise of Option.

 

(a)       Exercise of the purchase rights represented by the Option may be made
at any time or times on or before the Expiration Date by delivery to the Company
of a duly executed Notice of Exercise Form annexed hereto (or such other office
or agency of the Company as it may designate by notice in writing to the
Optionee at the address of such Optionee appearing on the books of the Company)
and surrender of this Agreement, together with payment of the aggregate Exercise
Price of the shares thereby purchased by wire transfer or cashier’s check drawn
on a United States bank in immediately available funds. The Option may not be
exercised for less than ten thousand (10,000) Option Shares, and may only be
exercised in increments of five thousand (5,000) Option Shares, unless otherwise
agreed to by the Company.

 

(b)       The Option shall be deemed to have been exercised on the later of the
date the Notice of Exercise is delivered to the Company and the date the
Exercise Price is received by the Company. The Option Shares shall be deemed to
have been issued, and Optionee or any other person so designated to be named
therein shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the Option has been exercised by payment to the Company
of the Exercise Price and all taxes required to be paid by the Optionee, if any,
have been paid.

 

(c)       The Company and the Optionee agree that, to the extent applicable,
unless and until registered under the Securities Act of 1933, as amended, which
registration remains effective, all shares of Common Stock acquired by the
Optionee upon exercise of the Option, may be stamped or otherwise imprinted with
legends in substantially the following form:

 

 

13

 

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF ANY EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND SUCH LAWS OR AN EXEMPTION FROM REGISTRATION
THEREUNDER.

 

4.       Adjustments and Restrictions.

 

(a)       Upon the occurrence of an event affecting the capitalization of the
Company, such as a stock split, reclassification, merger or otherwise, the
Company shall preserve the benefits or potential benefits intended to be made
available hereunder, either by equitably increase or decrease the number of
Option Shares, changing the kind of shares available under the Option, or
increasing or decreasing the Exercise Price of the Option.

 

(b)        The Optionee shall have no rights as a shareholder with respect to
any shares of Common Stock covered by the Option until the date of the issuance
of a certificate or certificates for the shares for which the Option has been
exercised. No adjustment shall be made for dividends or distributions or other
rights for which the record date is prior to the date such certificate or
certificates are issued.

 

(c)       The Company shall not be required (i) to transfer on its books any
Options Shares that have been sold or otherwise transferred in violation of any
of the provisions of this Agreement or (ii) to treat as owner of such Option
Shares or to accord the right to vote or pay dividends to any purchaser or other
transferee to whom such shares shall have been so transferred.

 

(d)       The Option may not be transferred, assigned, sold, hypothecated or
pledged by the Optionee without the prior written consent of the Company.
Subject to applicable securities laws, the Option and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon the
successors of the Company and the successors and permitted assigns of Optionee.

 

(e)       Optionee acknowledges that the Option Shares acquired upon the
exercise of the Option, if not registered for resale, will have restrictions
upon resale imposed by state and federal securities laws.

 

(f)       The Optionee represents and warrants that the Optionee is acquiring
the Option and shares of Common Stock issuable upon exercise thereof for the
Optionee's own account as an investment and not with a view toward the sale or
distribution thereof.

 

5.       Miscellaneous.

 

(a)        All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts to be
wholly performed within such state and without regard to conflicts of law
provisions that would result in the application of any laws other than the laws
of the State of New York. Any legal action or proceeding arising out of or
relating to this Agreement may be instituted in the courts of the State of New
York sitting in New York County or in the United States of America for the
Southern District of New York, and the parties hereto irrevocably submit to the
jurisdiction of each such court in any action or proceeding. Optionee hereby
irrevocably waives and agrees not to assert, by way of motion, as a defense, or
otherwise, in every suit, action or other proceeding arising out of or based on
this Agreement and brought in any such court, any claim that Optionee is not
subject personally to the jurisdiction of the above named courts, that
Optionee’s property is exempt or immune from attachment or execution, that the
suit, action or proceeding is brought in an inconvenient forum or that the venue
of the suit, action or proceeding is improper.

 

 

14

 

 

(b)        This Agreement may not be modified or amended, or the provisions
hereof waived, without the prior written agreement of the Company and Optionee.
No course of dealing or any delay or failure to exercise any right hereunder on
the part of Optionee shall operate as a waiver of such right or otherwise
prejudice Optionee’s rights, powers or remedies, notwithstanding all rights
hereunder terminate on the Expiration Date. The headings used in this Agreement
are for the convenience of reference only and shall not, for any purpose, be
deemed a part of this Agreement. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Agreement.

 

(c)       Any notice, request or other document required or permitted to be
given or delivered to the Optionee by the Company shall be delivered in
accordance with the notice provisions of the Subscription Agreement.

 

(d)       The Participant is responsible for any federal, state, local or other
taxes with respect to the Option Shares. The Company does not guarantee any
particular tax treatment or results in connection with the grant or vesting of
the Option Shares or the delivery of the Option Shares.

 

(e)       This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together constitute one agreement.

 

[Signature Page Follows]

 

15

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Stock Option Agreement
to be executed as of the Effective Date.

 

Optionee: Company:   SQL TECHNOLOGIES Corp.
_____________________________________       By:
_________________________________ By: ___________________________________ Name:
_______________________________ Name: John P. Campi Title:
________________________________ Title: Chief Executive Officer

 

 

16

 

 

 

NOTICE OF EXERCISE

 

To: SQL Technologies Corp.

 

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

 

(2) Please issue a certificate or certificates representing said Option Shares
in the name of the undersigned or in such other name as is specified below:

 

(3) The Option Shares shall be delivered to the following:

 

(4) The undersigned is an “accredited investor” as defined in Regulation D under
the Securities Act of 1933, as amended.

 

 

(OPTIONEE)

 

By: _____________________________________

 

Name: _____________________________________

 

Title: _____________________________________

 

Dated: _____________________________________

     

 

17

 

 

 

ASSIGNMENT FORM

 

(To assign the foregoing Stock Option Agreement, execute this form and supply
required information.

Do not use this form to exercise the Option.)

 

FOR VALUE RECEIVED, the foregoing Stock Option Agreement and all rights
evidenced thereby, including the Option, are hereby assigned to:

 

                                                                                
  

 

whose address is:

 

                                                                                
  

 

                                                                                
  

 

                                                                                
  

 

 

 

          Dated:                      ,                  Optionee’s Signature  
_______________________________________     Optionee’s Address:  
_______________________________________        
_______________________________________        
_______________________________________

 

 

      Signature Guaranteed:  

 

 

     

 

NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Stock Option Agreement, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a bank or trust
company. Officers of corporations and those acting in a fiduciary or other
representative capacity should file proper evidence of authority to assign the
foregoing Stock Option Agreement.

 

 

18

 

 

Exhibit B

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”),
OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND MAY ONLY BE ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE
EXERCISE OF THIS WARRANT, IF ANY, MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH
SECURITIES UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE LAW WITHOUT AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER
FROM THE SECURITIES AND EXCHANGE COMMISSION.

  

COMMON STOCK PURCHASE WARRANT

 

To Purchase _____ Shares of Common Stock of

 

SQL TECHNOLOGIES CORP.

 

June ___, 2016 (the “Issuance Date”)

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) CERTIFIES that, for value
received, ______ (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 this Warrant and on or prior to the third anniversary of
the date of this Warrant (the “Termination Date”) but not thereafter, to
subscribe for and purchase from SQL Technologies Corp., a Florida corporation
(the “Company”), up to _____ shares (the “Warrant Shares”) of the Common Stock,
no par value per share, of the Company (the “Common Stock”). The purchase price
of one share of Common Stock (the “Exercise Price”) under this Warrant shall be
(i) US $3.00 (three dollars US) if exercised prior to the one year anniversary
of the Issuance Date, (ii) $3.25 (three dollars and twenty-five cents US) if
exercised on or after the one year anniversary and before the two year
anniversary of the Issuance Date, or (iii) $3.50 (three dollars and fifty cents
US) if exercised on or after the two year anniversary and through the
Termination Date.

 

The Exercise Price and the number of Warrant Shares for which the Warrant is
exercisable shall be subject to adjustment as provided herein. Capitalized terms
used and not otherwise defined herein shall have the meanings set forth in that
certain Securities Subscription Agreement (the “Subscription Agreement”), dated
as of _______, 2016, among the Company and the Purchaser parties signatory
thereto.

 

1.        Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws, including transfer restrictions imposed by
applicable securities laws, and Section 7 of this Warrant, this Warrant and all
rights hereunder are transferable, in whole or in part, at the office or agency
of the Company by the Holder in person or by duly authorized attorney, upon
surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed. The transferee shall sign an investment letter in form and
substance reasonably satisfactory to the Company.

 

2        Authorization of Shares. The Company covenants that all Warrant Shares,
which may be issued upon the exercise of the purchase rights represented by this
Warrant in accordance with the terms of this Warrant, including the payment of
the exercise price for such Warrant Shares, will, upon exercise of the purchase
rights represented by this Warrant, be duly authorized, validly issued, fully
paid and nonassessable and free from all taxes, liens and charges in respect of
the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).

 

 

19

 

 

3.        Exercise of Warrant.

 

(a)        Exercise of the purchase rights represented by this Warrant may be
made at any time or times on or before the Termination Date by delivery to the
Company of a duly executed Notice of Exercise Form annexed hereto (or such other
office or agency of the Company as it may designate by notice in writing to the
registered Holder at the address of such Holder appearing on the books of the
Company) and surrender of this Warrant, together with payment of the aggregate
Exercise Price of the shares thereby purchased by wire transfer or cashier’s
check drawn on a United States bank in immediately available funds. Certificates
for shares purchased hereunder shall be delivered to the Holder within 5 Trading
Days from the delivery to the Company of the Notice of Exercise Form, surrender
of this Warrant and payment of the aggregate Exercise Price as set forth above
(“Warrant Share Delivery Date”). This Warrant shall be deemed to have been
exercised on the later of the date the Notice of Exercise is delivered to the
Company and the date the Exercise Price is received by the Company. The Warrant
Shares shall be deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a holder of record
of such shares for all purposes, as of the date the Warrant has been exercised
by payment to the Company of the Exercise Price and all taxes required to be
paid by the Holder, if any, pursuant to Section 5 prior to the issuance of such
shares, have been paid. If the Company fails to deliver to the Holder a
certificate or certificates representing the Warrant Shares pursuant to this
Section 3(a) by the end of business (New York, New York time) on the fifth
Trading Day following the Warrant Share Delivery Date, then the Holder will have
the right to rescind such exercise. 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
certificates representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.

 

(b)        If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing Warrant
Shares, deliver to Holder a new Warrant evidencing the rights of Holder to
purchase the unpurchased Warrant Shares called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant.

 

(c)        If at any time after one year from the date of issuance of this
Warrant, there is no effective Registration Statement registering the resale of
the Warrant Shares by the Holder at such time, this Warrant may also be
exercised at such time by means of a “cashless exercise” in which the Holder
shall be entitled to receive a certificate for the number of Warrant Shares
equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) = the VWAP on the Trading Day immediately preceding the date of such
election;

 

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

 

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

 

“VWAP” shall mean, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or quoted
on a Trading Market, the daily volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg Financial L.P.
(based on a trading day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);
(b) if the Common Stock is not then listed or quoted on a Trading Market and if
prices for the Common Stock are then reported in the “Pink Sheets” published by
the National Quotation Bureau Incorporated (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported; or (c) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Purchasers and reasonably acceptable to
the Company.

 

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

 

 

20

 

 

5.        Charges, Taxes and Expenses. Issuance of certificates for Warrant
Shares shall be made without charge to the Holder for any issue or transfer tax
or other incidental expense in respect of the issuance of such certificate, all
of which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder; and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.

 

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

 

7.        Transfer, Division and Combination.

 

(a)        Subject to compliance with any applicable securities laws and the
conditions set forth in Sections 1 and 7(e) hereof, and to the provisions of
Section 4 of the Subscription Agreement, this Warrant and all rights hereunder
are transferable, in whole or in part, upon surrender of this Warrant at the
principal office of the Company, together with a written assignment of this
Warrant substantially in the form attached hereto duly executed by the Holder or
its agent or attorney and funds sufficient to pay any transfer taxes payable
upon the making of such transfer. Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without having a
new Warrant issued.

 

(b)        This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with Section 7(a), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.

 

(c)        The Company shall prepare, issue and deliver at its own expense
(other than transfer taxes) the new Warrant or Warrants under this Section 7.

 

(d)        The Company agrees to maintain, at its aforesaid office, books for
the registration and the registration of transfer of the Warrants.

 

(e) The Company may require, as a condition of allowing such transfer (i) that
the Holder or transferee of this Warrant, as the case may be, furnish to the
Company a written opinion of counsel (which opinion shall be in form, substance
and scope customary for opinions of counsel in comparable transactions) to the
effect that such transfer may be made without registration under the Securities
Act and under applicable state securities or blue sky laws, (ii) that the holder
or transferee execute and deliver to the Company an investment letter in form
and substance acceptable to the Company and (iii) that the transferee be an
“accredited investor” as defined in Rule 501(a) promulgated under the Securities
Act or a qualified institutional buyer as defined in Rule 144A(a) under the
Securities Act.

 

8.        No Rights as Shareholder until Exercise. This Warrant does not entitle
the Holder to any voting rights or other rights as a shareholder of the Company
prior to the exercise hereof. Upon the surrender of this Warrant and the payment
of the aggregate Exercise Price (or by means of a cashless exercise), the
Warrant Shares so purchased shall be and be deemed to be issued to such Holder
as the record owner of such shares as of the close of business on the later of
the date of such surrender or payment.

 

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

 

 

21

 

 

10.        Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a Saturday,
Sunday or legal holiday.

 

11.        Adjustments of Exercise Price and Number of Warrant Shares. The
number and kind of securities purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time in the event
that the Company: (i) pays a dividend in shares of Common Stock or make a
distribution in shares of Common Stock to holders of its outstanding Common
Stock; (ii) subdivides its outstanding shares of Common Stock into a greater
number of shares; (iii) combines its outstanding shares of Common Stock into a
smaller number of shares of Common Stock; or (iv) issues any shares of its
capital stock in a reclassification of the Common Stock, then the number of
Warrant Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the Holder shall be entitled to receive the
kind and number of Warrant Shares or other securities of the Company which it
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and number
of Warrant Shares or other securities of the Company which are purchasable
hereunder, the Holder shall thereafter be entitled to purchase the number of
Warrant Shares or other securities resulting from such adjustment at an Exercise
Price per Warrant Share or other security obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of Warrant
Shares purchasable pursuant hereto immediately prior to such adjustment and
dividing by the number of Warrant Shares or other securities of the Company that
are purchasable pursuant hereto immediately after such adjustment. An adjustment
made pursuant to this paragraph shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.

 

12.        Subsequent Equity Sales. In the event that on or subsequent to the
Issuance Date, the Company issues or sells any Common Stock, any securities
which are convertible into or exchangeable for its Common Stock or any
convertible securities, or any warrants or other rights to subscribe for or to
purchase or any options for the purchase of its Common Stock or any such
convertible securities (the “Common Stock Equivalents”) (other than (i)
securities which are issued pursuant to the Subscription Agreement or this
Warrant, (ii) shares of Common Stock or options to purchase such shares issued
to employees, consultants, officers or directors in accordance with stock plans
approved by the Board of Directors, and shares of Common Stock issuable under
options or warrants that are outstanding as of the date hereof or issued
pursuant to any stock incentive plan authorized by the Board of Directors, and
(iii) shares of Common Stock issued pursuant to a stock dividend, split or other
similar transaction) at an effective price per share which is less than the
Exercise Price, then the Exercise Price in effect immediately prior to such
issue or sale shall be reduced to the lowest per share price of Common Stock in
such issuance or sale or deemed issuance or sale.

 

13.        Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of its property, assets or business to
another corporation and, pursuant to the terms of such reorganization,
reclassification, merger, consolidation or disposition of assets, shares of
common stock of the successor or acquiring corporation, or any cash, shares of
stock or other securities or property of any nature whatsoever (including
warrants or other subscription or purchase rights) in addition to or in lieu of
common stock of the successor or acquiring corporation (“Other Property”), are
to be received by or distributed to the holders of Common Stock of the Company,
then, from and after the consummation of such transaction or event, the Holder
shall have the right thereafter to receive, instead of the Warrant Shares, at
the option of the Holder, (a) upon exercise of this Warrant, the number of
shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and Other Property receivable upon
or as a result of such reorganization, reclassification, merger, consolidation
or disposition of assets by a Holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event or (b) cash
equal to the value of this Warrant as determined in accordance with the
Black-Scholes option pricing formula. For purposes of this Section 13, “common
stock of the successor or acquiring corporation” shall include stock of such
corporation of any class which is not preferred as to dividends or assets over
any other class of stock of such corporation and which is not subject to
redemption and shall also include any evidences of indebtedness, shares of stock
or other securities which are convertible into or exchangeable for any such
stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe for
or purchase any such stock. The foregoing provisions of this Section 13 shall
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.

 

 

22

 

 

14.        Notice of Adjustment. Whenever the number of Warrant Shares or number
or kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
give notice thereof to the Holder, which notice shall state the number of
Warrant Shares (and other securities or property) purchasable upon the exercise
of this Warrant and the Exercise Price of such Warrant Shares (and other
securities or property) after such adjustment, setting forth a brief statement
of the facts requiring such adjustment and setting forth the computation by
which such adjustment was made.

 

15.        Notice of Corporate Action. If at any time:

 

(a)        the Company shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend or other distribution,
or

 

(b)        there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation or,

 

(c)        there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;

 

then, in any one or more of such cases, the Company shall give to Holder (i)
prior written notice of the date on which a record date shall be selected for
such dividend or distribution or for determining rights to vote in respect of
any such reorganization, reclassification, merger, consolidation, sale,
transfer, disposition, liquidation or winding up, and (ii) in the case of any
such reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, prior written notice of the
date when the same shall take place. Such notice in accordance with the
foregoing clause also shall specify (i) the date on which the holders of Common
Stock shall be entitled to any such dividend or distribution, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up. Each
such written notice shall be sufficiently given if addressed to Holder at the
last address of Holder appearing on the books of the Company and delivered in
accordance with Section 16(d).

 

16.        Authorized Shares. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Trading Market upon
which the Common Stock may be listed.

 

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

 

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

 

 

23

 

 

17.        Miscellaneous.

 

(a)        Jurisdiction. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts to be wholly performed within such state and without regard to
conflicts of law provisions that would result in the application of any laws
other than the laws of the State of New York. Any legal action or proceeding
arising out of or relating to this Warrant may be instituted in the courts of
the State of New York sitting in New York County or in the United States of
America for the Southern District of New York, and the parties hereto
irrevocably submit to the jurisdiction of each such court in any action or
proceeding. Holder hereby irrevocably waives and agrees not to assert, by way of
motion, as a defense, or otherwise, in every suit, action or other proceeding
arising out of or based on this Warrant and brought in any such court, any claim
that Holder is not subject personally to the jurisdiction of the above named
courts, that Holder’s property is exempt or immune from attachment or execution,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper.

 

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

 

(c)        Nonwaiver and Expenses. No course of dealing or any delay or failure
to exercise any right hereunder on the part of Holder shall operate as a waiver
of such right or otherwise prejudice Holder’s rights, powers or remedies,
notwithstanding all rights hereunder terminate on the Termination Date. If the
Company willfully and knowingly fails to comply with any provision of this
Warrant, which results in any material damages to the Holder, the Company shall
pay to Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys’ fees, including
those of appellate proceedings, incurred by Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.

 

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

 

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

 

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

 

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

 

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

 

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

 

[Signature Page Follows]

 

24

 

 

 IN WITNESS WHEREOF, the Company has caused this Warrant to be executed as of
the Issuance Date by its officer thereunto duly authorized.

        SQL TECHNOLOGIES CORP.  

 

 

  By:  

 

 

         John P. Campi        President & CEO   

 

 

25

 

 

 

NOTICE OF EXERCISE

 

To: SQL Technologies Corp.

 

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

 

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

 

[ ] in lawful money of the United States; or

 

[ ] the cancellation of such number of Warrant Shares as is necessary, in
accordance with the formula set forth in subsection 3(c), to exercise this
Warrant with respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in subsection 3(c).

 

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

 

 

 

(4) The Warrant Shares shall be delivered to the following:

 

 

 

 

(5) The undersigned is an “accredited investor” as defined in Regulation D under
the Securities Act of 1933, as amended.

 

(PURCHASER)

 

By: _____________________________________

 

Name: _____________________________________

 

Title: _____________________________________

 

Dated: _____________________________________

     

 

26

 

 

 

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute this form and supply required
information.

Do not use this form to exercise the warrant.)

 

 

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

 

                                                                                
  

 

whose address is:

 

                                                                                
  

 

                                                                                
  

 

                                                                                
  .

 

          Dated:                      ,                  Holder’s Signature  
_______________________________________     Holder’s Address:  
_______________________________________        
_______________________________________        
_______________________________________

 

      Signature Guaranteed:  

 

 

 

 

NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.

 

Exhibit C

 

Volume Warrants

 

_______ (“Recipient”) shall be entitled to receive Common Stock Purchase
Warrants to purchase up to an additional 120,000 shares of the common stock, no
par value per share (“Common Stock”), of the Company (each a “Volume Warrant”
and collectively, the “Volume Warrants”). Each Volume Warrant shall become
issuable as provided below, and any issued Volume Warrant will be exercisable
commencing on the date it is issued and ending on the date that is prior to the
later of (i) five (5) years from the date of issuance or (ii) thirty (30) days
from the date Recipient is notified of the EBITDA (as defined herein) for the
year ending December 31, 2020 (the “Volume Warrant Term”).

 

Subject to adjustment as described below, the exercise price of one share of
Common Stock (the “Exercise Price”) will be $3.00 per share.

 

 

27

 

 

A portion of the Volume Warrants to purchase up to ______ shares of Common Stock
will, from time to time, become issuable by Recipient upon (i) the Company
achieving specific EBITDA Valuation (as defined below) thresholds in any fiscal
year (January 1 through December 31) prior to December 31, 2020, (ii) each
applicable Financing Transaction (as defined herein) or (iii) each Sales
Transaction (as defined herein) prior to December 31, 2020.

 

The form of the Volume Warrants will be substantially in the form attached
hereto as Exhibit B (the “Form of Warrant”), with such number of shares issuable
pursuant to a Volume Warrant and such Exercise Price thereto subject to
adjustment under the same terms as set forth in Sections 11 through 14 of the
Form of Warrant, and with such rights of the Holder thereof to notice of a
corporate action and right to the exchange of securities under the terms set
forth in Section 15 of the Form of Warrant, and in the case of Section 11, based
on the Company’s capitalization as of the Closing Date (as defined in the
Securities Subscription Agreement).

 

1.Company Valuation

Volume Warrants to purchase shares of Common Stock will become issuable in
accordance with the following schedule:

 

Upon the Company Achieving EBITDA Valuation of:

Number of Volume Warrants Issuable

to Purchase Common Stock

One Time Cumulative $350,000,000 to $499,999,999 35,000 35,000 $500,000,000 to
$749,999,999 20,000 55,000 $750,000,000 to $999,999,999 25,000 80,000 $1,000,000
or over 40,000 120,000

 

Volume Warrants will become issuable only once upon the achievement of each
threshold during the Volume Warrant Term.

Within one hundred and twenty (120) days of the end of each fiscal (calendar)
year, the Company shall cause its accountants to calculate the Company’s EBITDA
for the immediately preceding calendar year and deliver its calculation of this
EBITDA to the Company and to Recipient. Recipient’s Volume Warrants that become
issuable pursuant to this Section 1 will be deemed issuable as of the date
Recipient is notified of the EBITDA Valuation.

 

For Example:

 

If the Company’s EBITDA for 2017 is $47,000,000, which equates to an EBITDA
Valuation of $611,000,000, then Recipient’s Volume Warrants to purchase up to
55,000 shares of the Company’s Common Stock will become issuable (35,000 +
20,000).

 

Upon the Company Achieving EBITDA Valuation of: Number of Volume Warrants
Issuable to Purchase Common Stock One Time Cumulative $350,000,000 to
$499,999,999 35,000 35,000 $500,000,000 to $749,999,999 20,000 55,000

 

If the Company’s EBITDA for 2018 is equal to its EBITDA for 2017 of $47,000,000
then Recipient’s other Volume Warrants to purchase shares of Common Stock will
not become issuable based upon the Company’s EBITDA for 2018 since a new
threshold is not accomplished.

 

 

28

 

 

If, however, the Company’s EBITDA for 2017 is $47,000,000 (which equates to
$611,000,000 EBITDA Valuation) and the Company’s EBITDA for 2018 is $70,000,000
(which equates to $910,000,000 EBITDA Valuation), Recipient’s Volume Warrants to
purchase up to 80,000 shares of Common Stock would immediately become issuable.

 

Upon the Company Achieving EBITDA Valuation of: Number of Volume Warrants
Issuable to Purchase Common Stock One Time Cumulative $350,000,000 to
$499,999,999 35,000 35,000 $500,000,000 to $749,999,999 20,000 55,000
$750,000,000 to $999,999,999 25,000 80,000

 

2.Financing Event.

At each and every Transaction (as defined herein) in which the Company completes
a Financing (as defined herein) of at least $15,000,000 (in one or more closings
within a twelve (12) month period), Recipient’s Volume Warrants to purchase
shares of Common Stock will become issuable in accordance with the following
schedule:

 

 

Pre-Money Valuation

Number of Volume Warrants Issuable

to Purchase Common Stock

One Time Cumulative $350,000,000 to $499,999,999 35,000 35,000 $500,000,000 to
$749,999,999 20,000 55,000 $750,000,000 to $999,999,999 25,000 80,000
$1,000,000,000 or more 40,000 120,000

 

Recipient’s Volume Warrants to purchase shares of Common Stock will become
issuable at each threshold in the above schedule only once.

 

For Example:

If the Company has a $15,000,000 Financing (in one or more closings within a 12
month time period) with a Pre-Money Valuation of $600,000,000, then Recipient’s
Volume Warrants to purchase up to 55,000 shares of Common Stock will become
issuable (35,000 + 20,000).

 

 

Pre-Money Valuation

 

Number of Volume Warrants Issuable

to Purchase Common Stock

One Time Cumulative $350,000,000 to $499,999,999 35,000 35,000 $500,000,000 to
$749,999,999 20,000 55,000 $750,000,000 to $999,999,999 25,000 80,000
$1,000,000,000 or more 40,000 120,000

 

If the Company has a second Financing of at least $15,000,000 (in one or more
closings within a 12 month time period) with a Pre-Money Valuation of
$900,000,000, Recipient’s Volume Warrants to purchase up to 25,000 shares of
Common Stock will become issuable bringing the total number of shares of Common
Stock Recipient may purchase from the Volume Warrants that become issuable under
this Section 2 to 80,000 shares (35,000 + 20,000 + 25,000).

 

 

29

 

 

 

Pre-Money Valuation

 

Number of Volume Warrants Issuable

to Purchase Common Stock

One Time Cumulative $350,000,000 to $499,999,999 35,000 35,000 $500,000,000 to
$749,999,999 20,000 55,000 $750,000,000 to $999,999,999 25,000 80,000
$1,000,000,000 or more 40,000 120,000

 

If the Company has a third Financing of at least $15,000,000 (in one or more
closings within a 12 month time period) with a Pre-Money Valuation of
$1,100,000,000, Recipient’s Volume Warrants to purchase up to 40,000 shares of
Common Stock will become issuable, bringing the total number of shares of Common
Stock Recipient may purchase from the Volume Warrants that become issuable under
this Section 2 to 120,000 shares (35,000 + 20,000 + 25,000+ 40,000).

 

 

Pre-Money Valuation

 

Number of Volume Warrants Issuable

to Purchase Common Stock

One Time Cumulative $350,000,000 to $499,999,999 35,000 35,000 $500,000,000 to
$749,999,999 20,000 55,000 $750,000,000 to $999,999,999 25,000 80,000
$1,000,000,000 or more 40,000 120,000

 

3.Sales Transaction.

 

Upon the consummation of a Sale Transaction prior to December 31, 2020,
Recipient’s Volume Warrants to purchase Common Stock will become issuable in
accordance with Section 2 (above); provided, however, upon any Sale Transaction
with a Transaction Value (as defined herein) of less than $350,000,000,
Recipient’s Volume Warrants to purchase up to 20,000 shares of Common Stock will
become issuable.

 

For Example:

 

If the Company has a Sale Transaction with a Transaction Value of $600,000,000,
then Recipient’s Volume Warrants to purchase up to 55,000 shares of Common Stock
will become issuable (35,000 + 20,000).

 

 

Pre-Money Valuation

 

Number of Volume Warrants Issuable

to Purchase Common Stock

One Time Cumulative $350,000,000 to $499,999,999 35,000 35,000 $500,000,000 to
$749,999,999 20,000 55,000 $750,000,000 to $999,999,999 25,000 80,000
$1,000,000,000 or more 40,000 120,000

 

 

30

 

 

4.Definitions.

Contingent Payments means the consideration received or receivable by the
Company, its employees, current equity holders and/or any other parties in the
form of deferred performance or retention-based payments, “earn-outs”, or other
contingent payments based upon the occurrence of future events.

 

EBITDA means earnings before interest, taxes, depreciation and amortization.

 

EBITDA Valuation means EBITDA multiplied by thirteen (13).

 

Financing means a private placement of equity, equity-linked or debt securities
(including, without limitation, any convertible securities, preferred stock,
common stock, unsecured, non-senior or subordinated debt securities, senior
notes, loans, bank debt, and/or any debt with warrants) (any or all of which
being “Securities”) to provide financing involving less than 50% of the
business, assets or equity interests of the Company and/or any of its
subsidiaries or affiliates, or any right or option to acquire any of the
foregoing, or any entity formed by or at the direction of the Company, in one or
more transactions.

 

 

31

 

 

Pre-Money Valuation means pre-investment value of the enterprise that is implied
by the per-share price of the stock being offered and the number of
fully-diluted shares outstanding before the investment. Fully-diluted shares
shall include any outstanding shares and contingent equity such as stock
options, warrants, and convertible notes in the calculation. For purposes of
illustration, if the Company’s shares are valued at $100.00 and it has 5 million
shares fully-diluted outstanding prior to any new investment, then the Company
has a pre-money valuation of $500 million. Any non-cash consideration provided
to or received in connection with a Financing Event (including but not limited
to intellectual or intangible property, securities, labor or services rendered,
debt ((or cancellation thereof)) or tangible property) shall be valued for
purposes of calculating the Pre-Money Valuation as equaling the number of
securities issued in exchange for such consideration multiplied by (in the case
of debt securities) the face value of each such security or (in the case of
equity securities) the price per security paid in the then current round of
financing.

 

Sale Transaction means a merger, consolidation, joint venture, partnership,
spin-off, split-off, business combination, tender or exchange offer,
recapitalization, acquisition, sale, distribution, transfer or other disposition
of assets or equity interests, or other transaction, involving more than 50% of
the business, assets or equity interests of the Company and/or any of its
subsidiaries or affiliates, or any right or option to acquire any of the
foregoing, in one or more transactions.

 

Total Consideration means the total proceeds and other consideration paid or
received, or to be paid or received, directly or indirectly, in connection with
or in anticipation of a Sale Transaction (which consideration shall be deemed to
include amounts in escrow), including, without limitation, cash, notes,
securities, and other property received or to be received by the Company or any
of its affiliates, creditors or security holders (including, without limitation,
the holders of convertible securities, options, warrants, stock appreciation
rights or similar rights, whether or not vested); deferred non-contingent
payments (such as installment payments); amounts payable under above-market
consulting agreements, above-market employment contracts, non-compete or
severance agreements, employee benefit plans, reimbursement for taxes or similar
arrangements; Contingent Payments (as defined below); and, in the case of a
partnership, joint venture or similar structure, the gross value of all cash,
securities, assets and other consideration contributed, invested, committed, or
otherwise made available by the Company or any other parties to such
partnership, joint venture or similar structure.

 

For the purpose of calculating the consideration received or receivable in
connection with or in anticipation of a Sale Transaction, any securities (other
than a promissory note) will be valued at the time of the closing of the Sale
Transaction (without regard to any restrictions on transferability) as follows:
(i) if such securities are traded on a stock exchange, the securities will be
valued at the average last sale or closing price for the ten trading days
immediately prior to the closing of the Sale Transaction; (ii) if such
securities are traded primarily in over-the-counter transactions, the securities
will be valued at weighted average of the mean of the closing bid and asked
quotations over a ten trading day period immediately prior to the closing of the
Sale Transaction with the weighting based on the number of shares actually
traded each day over such ten trading day period; and (iii) if such securities
have not been traded in the public market prior to the closing of the Sale
Transaction, the securities will be valued at the fair market value thereof as
of the day prior to the closing of the Sale Transaction, as such fair market
value shall be mutually agreed by Recipient and the Company acting in good
faith. The value of any purchase money or other promissory notes, installment
sales contracts or other deferred non-contingent consideration shall be deemed
to be the face amount thereof, and shall be included as part of the Total
Consideration for the purpose of determining the number of Volume Warrants
issued to Recipient. In the event the Transaction Value includes any Contingent
Payments, the Company and Recipient will negotiate in good faith to agree on the
value of such Contingent Payments for the purpose of calculating that the
Transaction Value and the number of Volume Warrants issued to Recipient. If the
parties cannot reach such an agreement, an additional number of Volume Warrants
will be issued to Recipient, if applicable based on the Transaction Value, in
the same proportions and at the same times as the Contingent Payments are paid
or received. Any other non-cash consideration shall be valued at the fair market
value thereof as of the day prior to the closing of the Sale Transaction, as
such fair market value shall be mutually agreed by Recipient and the Company
acting in good faith.

 

 

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Transaction Value means the total value of the Sale Transaction calculated as if
100% of the equity interests of the Company on a fully diluted basis had been
sold by dividing the Total Consideration by the percentage of ownership which is
sold. The Transaction Value shall include the aggregate principal amount of any
debt, pension liabilities, guarantees and any other liabilities or obligations
of the Company or any of its affiliates or security holders (i) retired,
refinanced, restructured, redeemed, decreased, repaid or extinguished in
connection with or anticipation of a Sale Transaction or (ii) assumed in an
acquisition of assets or which remain outstanding at the time of closing in all
other cases. If any cash or other assets of the Company and/or any of its
subsidiaries or affiliates are sold or otherwise transferred to another party
after the date hereof (including, without limitation, any dividends,
distributions or other amounts paid to option or other security holders, amounts
paid to repurchase any securities, or transaction-related bonus payments made to
employees), or are retained after the consummation of the Sale Transaction, the
Transaction Value will be increased to reflect the fair market value of any such
assets. Any part of the Total Consideration held pursuant to an escrow account
established before or in connection with the consummation of a Sale Transaction
shall be deemed paid or received and not contingent. For purposes of this
provision, the Transaction Value shall exclude cash or cash equivalents
remaining on the Company’s financial statements at closing of a Transaction.

 

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