Exhibit 10.1

 

FAT BRANDS INC.

 

WARRANT AGENCY AGREEMENT

(July 16, 2020)

 

This WARRANT AGENCY AGREEMENT (this “Warrant Agreement”) dated as of July 16,
2020 (the “Issuance Date”) between FAT Brands Inc., a Delaware corporation (the
“Company”), and VStock Transfer, LLC, a California limited liability company
(the “Warrant Agent”).

 

WHEREAS, pursuant to the terms of that certain Underwriting Agreement
(“Underwriting Agreement”), dated July 13, 2020, by and between the Company and
ThinkEquity, a division of Fordham Financial Management, Inc., as representative
of the underwriters set forth therein, the Company is engaged in a public
offering (the “Offering”) of 360,000 shares of Series B Cumulative Preferred
Stock of the Company and Warrants (the “Warrants”) to purchase 2,070,000 shares
of common stock, par value $0.0001 per share (“Common Stock”), of the Company
(the “Warrant Shares”), including shares and Warrants issuable pursuant to the
underwriters’ over-allotment option;

 

WHEREAS, the Company has filed with the Securities and Exchange Commission (the
“Commission”) a Registration Statement, No. 333-239032 on Form S-1 (as the same
may be amended from time to time, the “Registration Statement”), for the
registration under the Securities Act of 1933, as amended (the “Securities
Act”), of shares of Series B Cumulative Preferred Stock, Warrants and Warrant
Shares, and such Registration Statement was declared effective on July 13, 2020;

 

WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing to so act, in accordance with the terms set
forth in this Warrant Agreement in connection with the issuance, registration,
transfer, exchange and exercise of the Warrants;

 

WHEREAS, the Company desires to provide for the provisions of the Warrants, the
terms upon which they shall be issued and exercised, and the respective rights,
limitation of rights, and immunities of the Company, the Warrant Agent, and the
holders of the Warrants; and

 

WHEREAS, all acts and things have been done and performed which are necessary to
make the Warrants the valid, binding and legal obligations of the Company, and
to authorize the execution and delivery of this Warrant Agreement.

 

NOW, THEREFORE, in consideration of the mutual agreements herein contained, the
parties hereto agree as follows:

 

1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent
to act as agent for the Company with respect to the Warrants, and the Warrant
Agent hereby accepts such appointment and agrees to perform the same in
accordance with the express terms and conditions set forth in this Warrant
Agreement (and no implied terms or conditions).

 

2. Warrants.

 

2.1 Form of Warrants. The Warrants shall be registered securities and shall be
initially evidenced by a global Warrant certificate (“Global Certificate”) in
the form of Annex A to this Warrant Agreement, which shall be deposited on
behalf of the Company with a custodian for The Depository Trust Company (“DTC”)
and registered in the name of Cede & Co., a nominee of DTC. If DTC subsequently
ceases to make its settlement system available for the Warrants, the Company may
instruct the Warrant Agent regarding making arrangements for book-entry
settlement. In the event that the Warrants are not eligible for, or it is no
longer necessary to have the Warrants available in, registration in the name of
Cede & Co., a nominee of DTC, the Company may instruct the Warrant Agent to
provide written instructions to DTC to deliver to the Warrant Agent for
cancellation the Global Certificate, and the Company shall instruct the Warrant
Agent to deliver to each Holder (as defined below) separate certificates
evidencing Warrants (“Definitive Certificates” and, together with the Global
Certificate, “Warrant Certificates”), in the form of Annex C to this Warrant
Agreement. The Warrants represented by the Global Certificate are referred to as
“Global Warrants”.

 

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2.2. Issuance and Registration of Warrants.

 

2.2.1. Warrant Register. The Warrant Agent shall maintain books (“Warrant
Register”) for the registration of original issuance and the registration of
transfer of the Warrants. Any Person in whose name ownership of a beneficial
interest in the Warrants evidenced by a Global Certificate is recorded in the
records maintained by DTC or its nominee shall be deemed the “beneficial owner”
thereof, provided that all such beneficial interests shall be held through a
Participant (as defined below), which shall be the registered holder of such
Warrants.

 

2.2.2. Issuance of Warrants. Upon the initial issuance of the Warrants, the
Warrant Agent shall issue the Global Certificate and deliver the Warrants in the
DTC settlement system in accordance with written instructions delivered to the
Warrant Agent by the Company. Ownership of beneficial interests in the Warrants
shall be shown on, and the transfer of such ownership shall be effected through,
records maintained (i) by DTC and (ii) by institutions that have accounts with
DTC (each, a “Participant”), subject to a Holder’s right to elect to receive a
Warrant in certificated form in the form of Annex C to this Warrant Agreement.
Any Holder desiring to elect to receive a Warrant in certificated form shall
make such request in writing delivered to the Warrant Agent pursuant to Section
2.2.8, and shall surrender to the Warrant Agent the interest of the Holder on
the books of the Participant evidencing the Warrants which are to be represented
by a Definitive Certificate through the DTC settlement system. Thereupon, the
Warrant Agent shall countersign and deliver to the person entitled thereto a
Warrant Certificate or Warrant Certificates, as the case may be, as so
requested.

 

2.2.3. Beneficial Owner; Holder. Prior to due presentment for registration of
transfer of any Warrant, the Company and the Warrant Agent may deem and treat
the person in whose name that Warrant shall be registered on the Warrant
Register (the “Holder”) as the absolute owner of such Warrant for purposes of
any exercise thereof, and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Warrant Agent or any agent of the Company or the Warrant Agent from giving
effect to any written certification, proxy or other authorization furnished by
DTC governing the exercise of the rights of a holder of a beneficial interest in
any Warrant. The rights of beneficial owners in a Warrant evidenced by the
Global Certificate shall be exercised by the Holder or a Participant through the
DTC system, except to the extent set forth herein or in the Global Certificate.

 

2.2.4. Execution. The Warrant Certificates shall be executed on behalf of the
Company by any authorized officer of the Company (an “Authorized Officer”),
which need not be the same authorized signatory for all of the Warrant
Certificates, either manually or by facsimile signature. The Warrant
Certificates shall be countersigned by an authorized signatory of the Warrant
Agent, which need not be the same signatory for all of the Warrant Certificates,
and no Warrant Certificate shall be valid for any purpose unless so
countersigned. In case any Authorized Officer of the Company that signed any of
the Warrant Certificates ceases to be an Authorized Officer of the Company
before countersignature by the Warrant Agent and issuance and delivery by the
Company, such Warrant Certificates, nevertheless, may be countersigned by the
Warrant Agent, issued and delivered with the same force and effect as though the
person who signed such Warrant Certificates had not ceased to be such officer of
the Company; and any Warrant Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Warrant
Certificate, shall be an Authorized Officer of the Company authorized to sign
such Warrant Certificate, although at the date of the execution of this Warrant
Agreement any such person was not such an Authorized Officer.

 

2.2.5. Registration of Transfer. At any time at or prior to the Expiration Date
(as defined below), a transfer of any Warrants may be registered and any Warrant
Certificate or Warrant Certificates may be split up, combined or exchanged for
another Warrant Certificate or Warrant Certificates evidencing the same number
of Warrants as the Warrant Certificate or Warrant Certificates surrendered. Any
Holder desiring to register the transfer of Warrants or to split up, combine or
exchange any Warrant Certificate shall make such request in writing delivered to
the Warrant Agent, and shall surrender to the Warrant Agent the Warrant
Certificate or Warrant Certificates evidencing the Warrants the transfer of
which is to be registered or that is or are to be split up, combined or
exchanged. Thereupon, the Warrant Agent shall countersign and deliver to the
person entitled thereto a Warrant Certificate or Warrant Certificates, as the
case may be, as so requested. The Warrant Agent may require reasonable and
customary payment, by the Holder requesting a registration of transfer of
Warrants or a split-up, combination or exchange of a Warrant Certificate (but,
for purposes of clarity, not upon the exercise of the Warrants and issuance of
Warrant Shares to the Holder), of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with such registration of
transfer, split-up, combination or exchange, together with reimbursement to the
Warrant Agent of all reasonable expenses incidental thereto.

 

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2.2.6. Loss, Theft and Mutilation of Warrant Certificates. Upon receipt by the
Company and the Warrant Agent of evidence reasonably satisfactory to them of the
loss, theft, destruction or mutilation of a Warrant Certificate, and, in case of
loss, theft or destruction, of indemnity or security in customary form and
amount, and reimbursement to the Company and the Warrant Agent of all reasonable
expenses incidental thereto, and upon surrender to the Warrant Agent and
cancellation of the Warrant Certificate if mutilated, the Warrant Agent shall,
on behalf of the Company, countersign and deliver a new Warrant Certificate of
like tenor to the Holder in lieu of the Warrant Certificate so lost, stolen,
destroyed or mutilated. The Warrant Agent may charge the Holder an
administrative fee for processing the replacement of lost Warrant Certificates,
which shall be charged only once in instances where a single surety bond
obtained covers multiple certificates. The Warrant Agent may receive
compensation from the surety companies or surety bond agents for administrative
services provided to them.

 

2.2.7. Proxies. The Holder of a Warrant may grant proxies or otherwise authorize
any person, including the Participants and beneficial holders that may own
interests through the Participants, to take any action that a Holder is entitled
to take under this Agreement or the Warrants; provided, however, that at all
times that Warrants are evidenced by a Global Certificate, exercise of those
Warrants shall be effected on their behalf by Participants through DTC in
accordance the procedures administered by DTC.

 

2.2.8. Warrant Certificate Request. A Holder has the right to elect at any time
or from time to time a Warrant Exchange (as defined below) pursuant to a Warrant
Certificate Request Notice (as defined below). Upon written notice by a Holder
to the Warrant Agent for the exchange of some or all of such Holder’s Global
Warrants for a Definitive Certificate evidencing the same number of Warrants,
which request shall be in the form attached hereto as Annex E (a “Warrant
Certificate Request Notice” and the date of delivery of such Warrant Certificate
Request Notice by the Holder, the “Warrant Certificate Request Notice Date” and
the deemed surrender upon delivery by the Holder of a number of Global Warrants
for the same number of Warrants evidenced by a Definitive Certificate, a
“Warrant Exchange”), the Warrant Agent shall promptly effect the Warrant
Exchange and shall promptly issue and deliver to the Holder a Definitive
Certificate for such number of Warrants in the name set forth in the Warrant
Certificate Request Notice. Such Definitive Certificate shall be dated the
original issue date of the Warrants, shall be manually executed by an authorized
signatory of the Company, shall be in the form attached hereto as Annex C, and
shall be reasonably acceptable in all respects to such Holder. In connection
with a Warrant Exchange, the Company agrees to deliver, or to direct the Warrant
Agent to deliver, the Definitive Certificate to the Holder within the earlier of
(i) two (2) Trading Days and (ii) the number of Trading Days comprising the
Standard Settlement Period of the Warrant Certificate Request Notice pursuant to
the delivery instructions in the Warrant Certificate Request Notice (“Warrant
Certificate Delivery Date”). If the Company fails for any reason to deliver to
the Holder the Definitive Certificate subject to the Warrant Certificate Request
Notice by the Warrant Certificate Delivery Date, the Company shall pay to the
Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of
Warrant Shares evidenced by such Definitive Certificate (based on the VWAP (as
defined in the Warrants) of the Common Stock on the Warrant Certificate Request
Notice Date), $10 per Business Day for each Business Day after such Warrant
Certificate Delivery Date until such Definitive Certificate is delivered or,
prior to delivery of such Warrant Certificate, the Holder rescinds such Warrant
Exchange. The Company covenants and agrees that, upon the date of delivery of
the Warrant Certificate Request Notice, the Holder shall be deemed to be the
holder of the Definitive Certificate and, notwithstanding anything to the
contrary set forth herein, the Definitive Certificate shall be deemed for all
purposes to contain all of the terms and conditions of the Warrants evidenced by
such Warrant Certificate and the terms of this Agreement, other than Sections
3(c) and 9 herein, shall not apply to the Warrants evidenced by the Definitive
Certificate.

 

2.2.9. For purposes of clarity, if there is a conflict between the express terms
of this Warrant Agreement and the Warrant certificate in the form of Annex C
hereto with respect to terms of the Warrants, the terms of the Warrant
certificate shall govern and control.

 

3. Terms and Exercise of Warrants.

 

3.1. Exercise Price. Each Warrant shall entitle the Holder, subject to the
provisions of the applicable Warrant Certificate and of this Warrant Agreement,
to purchase from the Company the number of shares of Common Stock stated
therein, at the price of $5.00 per whole share, subject to the subsequent
adjustments provided in Section 4 hereof. The term “Exercise Price” as used in
this Warrant Agreement refers to the price per share at which shares of Common
Stock may be purchased at the time a Warrant is exercised.

 

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3.2. Duration of Warrants. Warrants may be exercised only during the period
(“Exercise Period”) commencing on the earlier of (i) the one-year anniversary of
the Issuance Date or (ii) the FCCG Merger, and terminating at 5:00 P.M., New
York City time (the “close of business”) on July 16, 2025 (the “Expiration
Date”). Each Warrant not exercised on or before the Expiration Date shall become
void, and all rights thereunder and all rights in respect thereof under this
Warrant Agreement shall cease at the close of business on the Expiration Date.
For purposes of this paragraph, the “FCCG Merger” shall mean a merger,
acquisition or other business combination transaction involving Fog Cutter
Capital Group, Inc. and the Company and/or its subsidiaries.

 

3.3. Exercise of Warrants.

 

3.3.1. Exercise and Payment.

 

(a) Exercise of the purchase rights represented by a Warrant may be made, in
whole or in part, at any time or times during the Exercise Period by delivery to
the Company or the Warrant Agent of the Notice of Exercise in the form annexed
as Annex B hereto (the “Notice of Exercise”). Within the earlier of (i) two (2)
Trading Days and (ii) the number of Trading Days comprising the Standard
Settlement Period following the date the Holder delivers the Notice of Exercise
as aforesaid, the Holder shall deliver the aggregate Exercise Price for the
shares specified in the applicable Notice of Exercise by wire transfer or
cashier’s check drawn on a United States bank unless the cashless exercise
procedure specified in Section 3.3.6 below is specified in the applicable Notice
of Exercise. No ink-original Notice of Exercise shall be required, nor shall any
medallion guarantee (or other type of guarantee or notarization) of any Notice
of Exercise form be required. Notwithstanding anything herein to the contrary,
the Holder shall not be required to physically surrender a Warrant Certificate
to the Company until the Holder has purchased all of the Warrant Shares
available thereunder and the Warrant has been exercised in full, in which case,
the Holder shall surrender such Warrant to the Company for cancellation within
three (3) Trading Days of the date the final Notice of Exercise is delivered to
the Company. Partial exercises of a Warrant resulting in purchases of a portion
of the total number of Warrant Shares available thereunder shall have the effect
of lowering the outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased. The Holder
and the Company shall maintain records showing the number of Warrant Shares
purchased and the date of such purchases. The Company shall deliver any
objection to any Notice of Exercise within one (1) Business Day of receipt of
such notice. The Holder and any assignee, by acceptance of a Warrant,
acknowledge and agree that, by reason of the provisions of this paragraph,
following the purchase of a portion of the Warrant Shares hereunder, the number
of Warrant Shares available for purchase hereunder at any given time may be less
than the amount stated on the face thereof.

 

Notwithstanding the foregoing in this Section 3.3.1 a holder whose interest in a
Warrant is a beneficial interest in certificate(s) representing such Warrant
held in registered form through DTC (or another established clearing corporation
performing similar functions), shall effect exercises made pursuant to this
Section 3.3.1 by delivering to DTC (or such other clearing corporation, as
applicable) the appropriate instruction form for exercise, complying with the
procedures to effect exercise that are required by DTC (or such other clearing
corporation, as applicable), subject to a Holder’s right to elect to receive a
Warrant in certificated form pursuant to the terms of the Warrant Agency
Agreement, in which case this sentence shall not apply. Upon giving irrevocable
instructions to its Participant to exercise Warrants, solely for purposes of
Regulation SHO, the holder whose interest in the Warrant is a beneficial
interest shall be deemed to have exercised such Warrant, regardless of when the
applicable Warrant Shares are delivered to such holder.

 

3.3.2. Issuance of Warrant Shares.

 

(a) The Warrant Agent shall, on the Trading Day following the date of exercise
of any Warrant, advise the Company, the transfer agent and registrar for the
Company’s Common Stock, in respect of (i) the number of Warrant Shares indicated
on the Notice of Exercise as issuable upon such exercise with respect to such
exercised Warrants, (ii) the instructions of the Holder or Participant, as the
case may be, provided to the Warrant Agent with respect to the delivery of the
Warrant Shares and the number of Warrants that remain outstanding after such
exercise and (iii) such other information as the Company or such transfer agent
and registrar shall reasonably request.

 

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(b) The Company shall cause the Warrant Shares purchased hereunder to be
transmitted by the Transfer Agent to the Holder by crediting the account of the
Holder’s or its designee’s balance account with The Depository Trust Company
through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is
then a participant in such system and either (A) there is an effective
registration statement permitting the issuance of the Warrant Shares to or
resale of the Warrant Shares by Holder or (B) this Warrant is being exercised
via cashless exercise, and otherwise by physical delivery of a certificate,
registered in the Company’s share register in the name of the Holder or its
designee, for the number of Warrant Shares to which the Holder is entitled
pursuant to such exercise to the address specified by the Holder in the Notice
of Exercise by the date that is the earlier of (i) two (2) Trading Days and (ii)
the number of Trading Days comprising the Standard Settlement Period after the
delivery to the Company of the Notice of Exercise (such date, the “Warrant Share
Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be
deemed for all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date of delivery of the Warrant Shares, provided that
payment of the aggregate Exercise Price (other than in the case of a cashless
exercise) is received within the earlier of (i) two (2) Trading Days of and (ii)
the number of Trading Days comprising the Standard Settlement Period following
delivery of the Notice of Exercise. If the Company fails for any reason to
deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the
Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as
liquidated damages and not as a penalty, for each $1,000 of Warrant Shares
subject to such exercise (based on the VWAP of the Common Stock on the date of
the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per
Trading Day on the fifth Trading Day after such liquidated damages begin to
accrue) for each Trading Day after such Warrant Share Delivery Date until such
Warrant Shares are delivered or Holder rescinds such exercise. The Company
agrees to maintain a transfer agent that is a participant in the FAST program so
long as this Warrant remains outstanding and exercisable. As used herein,
“Standard Settlement Period” means the standard settlement period, expressed in
a number of Trading Days, on the Company’s primary Trading Market with respect
to the Common Stock as in effect on the date of delivery of the Notice of
Exercise.

 

3.3.3. Valid Issuance. All Warrant Shares issued by the Company upon the proper
exercise of a Warrant in conformity with this Warrant Agreement shall be validly
issued, fully paid and non-assessable.

 

3.3.4. No Fractional Exercise. No fractional Warrant Shares will be issued upon
the exercise of the Warrant. If, by reason of any adjustment made pursuant to
Section 4, a Holder would be entitled, upon the exercise of such Warrant, to
receive a fractional interest in a share, the Company shall, upon such exercise,
round up or down, as applicable, to the nearest whole number the number of
Warrant Shares to be issued to such Holder.

 

3.3.5 No Transfer Taxes. Issuance of Warrant Shares shall be made without charge
to the Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such Warrant Shares, all of which taxes and expenses
shall be paid by the Company, and such Warrant Shares shall be issued in the
name of the Holder or in such name or names as may be directed by the Holder;
provided, however, that in the event Warrant Shares are to be issued in a name
other than the name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto duly executed by the
Holder and the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto. The Company
shall pay all Transfer Agent fees required for same-day processing of any Notice
of Exercise and all fees to the Depository Trust Company (or another established
clearing corporation performing similar functions) required for same-day
electronic delivery of the Warrant Shares.

 

3.3.6 Restrictive Legend Events; Cashless Exercise Under Certain Circumstances.

 

(i) The Company shall use its reasonable best efforts to maintain the
effectiveness of the Registration Statement and the current status of the
prospectus included therein or to file and maintain the effectiveness of another
registration statement and another current prospectus covering the Warrants and
the Warrant Shares at any time that the Warrants are exercisable. The Company
shall provide to the Warrant Agent and each Holder prompt written notice of any
time that the Company is unable to deliver the Warrant Shares via DTC transfer
or otherwise without restrictive legend because (A) the Commission has issued a
stop order with respect to the Registration Statement, (B) the Commission
otherwise has suspended or withdrawn the effectiveness of the Registration
Statement, either temporarily or permanently, (C) the Company has suspended or
withdrawn the effectiveness of the Registration Statement, either temporarily or
permanently, (D) the prospectus contained in the Registration Statement is not
available for the issuance of the Warrant Shares to the Holder or (E) otherwise
(each a “Restrictive Legend Event”). To the extent that the Warrants cannot be
exercised as a result of a Restrictive Legend Event or a Restrictive Legend
Event occurs after a Holder has exercised Warrants in accordance with the terms
of the Warrants but prior to the delivery of the Warrant Shares, the Company
shall, at the election of the Holder, which shall be given within five (5) days
of receipt of such notice of the Restrictive Legend Event, either (A) rescind
the previously submitted Election to Purchase and the Company shall return all
consideration paid by registered holder for such shares upon such rescission or
(B) treat the attempted exercise as a cashless exercise as described in
paragraph (ii) below and refund the cash portion of the exercise price to the
Holder.

 

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(ii) If a Restrictive Legend Event has occurred, the Warrant may also be
exercisable on a cashless basis. Notwithstanding anything herein to the
contrary, the Company shall not be required to make any cash payments or net
cash settlement to the Holder in lieu of delivery of the Warrant Shares. Upon a
“cashless exercise”, the Holder shall be entitled to receive the number of
Warrant Shares equal to the quotient (if such quotient would be a positive
number) obtained by dividing (A-B) (X) by (A), where:

 

(A) = the last VWAP immediately preceding the date of exercise giving rise to
the applicable “cashless exercise”, as set forth in the applicable Election to
Purchase (to clarify, the “last VWAP” will be the last VWAP as calculated over
an entire Trading Day such that, in the event that this Warrant is exercised at
a time that the Trading Market is open, the prior Trading Day’s VWAP shall be
used in this calculation       (B) = the Exercise Price of the Warrant, as
adjusted as set forth herein; and       (X) = the number of Warrant Shares that
would be issuable upon exercise of the Warrant in accordance with the terms of
the Warrant if such exercise were by means of a cash exercise rather than a
cashless exercise.

 

If the Warrant Shares are issued in such a cashless exercise, the Company
acknowledges and agrees that, in accordance with Section 3(a)(9) of the
Securities Act, the Warrant Shares shall take on the registered characteristics
of the Warrants being exercised and the Company agrees not to take any position
contrary thereto. Upon receipt of an Election to Purchase for a cashless
exercise, the Warrant Agent will promptly deliver a copy of the Election to
Purchase to the Company to confirm the number of Warrant Shares issuable in
connection with the cashless exercise. The Company shall calculate and transmit
to the Warrant Agent in a written notice, and the Warrant Agent shall have no
duty, responsibility or obligation under this section to calculate, the number
of Warrant Shares issuable in connection with any cashless exercise. The Warrant
Agent shall be entitled to rely conclusively on any such written notice provided
by the Company, and the Warrant Agent shall not be liable for any action taken,
suffered or omitted to be taken by it in accordance with such written
instructions or pursuant to this Warrant Agreement. Notwithstanding anything
herein to the contrary, on the Termination Date, this Warrant shall be
automatically exercised via cashless exercise pursuant to this Section 3.3.6.

 

3.3.7 Disputes. In the case of a dispute as to the determination of the Exercise
Price or the arithmetic calculation of the number of Warrant Shares issuable in
connection with any exercise, the Company shall promptly deliver to the Holder
the number of Warrant Shares that are not disputed.

 

3.3.8 Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon
Exercise. In addition to any other rights available to the Holder, if the
Company fails to cause the Transfer Agent to transmit to the Holder the Warrant
Shares in accordance with the provisions of Section 3.3.2(b) above pursuant to
an exercise on or before the Warrant Share Delivery Date, and if after such date
the Holder is required by its broker to purchase (in an open market transaction
or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of
Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant
Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”),
then the Company shall (A) pay in cash to the Holder the amount, if any, by
which (x) the Holder’s total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased exceeds (y) the amount obtained
by multiplying (1) the number of Warrant Shares that the Company was required to
deliver to the Holder in connection with the exercise at issue times (2) the
price at which the sell order giving rise to such purchase obligation was
executed, and (B) at the option of the Holder, either reinstate the portion of
the Warrant and equivalent number of Warrant Shares for which such exercise was
not honored (in which case such exercise shall be deemed rescinded) or deliver
to the Holder the number of shares of Common Stock that would have been issued
had the Company timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (A) of the immediately
preceding sentence the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the Company,
evidence of the amount of such loss. Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver shares
of Common Stock upon exercise of the Warrant as required pursuant to the terms
hereof.

 

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3.3.9 Beneficial Ownership Limitation. The Company shall not effect any exercise
of this Warrant, and a Holder shall not have the right to exercise any portion
of a Warrant, pursuant to Section 3 or otherwise, to the extent that after
giving effect to such issuance after exercise as set forth on the applicable
Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any
other Persons acting as a group together with the Holder or any of the Holder’s
Affiliates (such Persons, “Attribution Parties”)), would beneficially own in
excess of the Beneficial Ownership Limitation (as defined below). For purposes
of the foregoing sentence, the number of shares of Common Stock beneficially
owned by the Holder and its Affiliates and Attribution Parties shall include the
number of shares of Common Stock issuable upon exercise of such Warrant with
respect to which such determination is being made, but shall exclude the number
of shares of Common Stock which would be issuable upon (i) exercise of the
remaining, non-exercised portion of such Warrant beneficially owned by the
Holder or any of its Affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or non-converted portion of any other securities
of the Company (including, without limitation, any other securities of the
Company which would entitle the holder thereof to acquire at any time shares of
Common Stock, including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, shares of Common Stock (“Common Stock Equivalents”)) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for purposes of this
Section 3.3.9, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder, it being acknowledged by the Holder that the Company is not
representing to the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for any schedules
required to be filed in accordance therewith. To the extent that the limitation
contained in this Section 3.3.9 applies, the determination of whether a Warrant
is exercisable (in relation to other securities owned by the Holder together
with any Affiliates and Attribution Parties) and of which portion of a Warrant
is exercisable shall be in the sole discretion of the Holder, and the submission
of a Notice of Exercise shall be deemed to be the Holder’s determination of
whether a Warrant is exercisable (in relation to other securities owned by the
Holder together with any Affiliates and Attribution Parties) and of which
portion of a Warrant is exercisable, in each case subject to the Beneficial
Ownership Limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination. In addition, a determination as to
any group status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. For purposes of this Section 3.3.9, in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (A) the Company’s most recent
periodic or annual report filed with the Commission, as the case may be, (B) a
more recent public announcement by the Company or (C) a more recent written
notice by the Company or the Transfer Agent setting forth the number of shares
of Common Stock outstanding. Upon the written or oral request of a Holder, the
Company shall within two Trading Days confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company, including
such Warrant, by the Holder or its Affiliates or Attribution Parties since the
date as of which such number of outstanding shares of Common Stock was reported.
The “Beneficial Ownership Limitation” shall be 4.99% (or, upon election by a
Holder prior to the issuance of any Warrants, 9.99%) of the number of shares of
the Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock issuable upon exercise of a Warrant. The Holder, upon
notice to the Company, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 3.3.9, provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock upon exercise of this Warrant held by the Holder and the
provisions of this Section 3.3.9 shall continue to apply. Any increase in the
Beneficial Ownership Limitation will not be effective until the 61st day after
such notice is delivered to the Company. The provisions of this paragraph shall
be construed and implemented in a manner otherwise than in strict conformity
with the terms of this Section 3.3.9 to correct this paragraph (or any portion
hereof) which may be defective or inconsistent with the intended Beneficial
Ownership Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation. The
limitations contained in this paragraph shall apply to a successor holder of
this Warrant.

 

7

 

 

4. Adjustments.

 

4.1 Adjustment upon Subdivisions or Combinations. If the Company, at any time
while the Warrants are outstanding: (i) pays a stock dividend or otherwise makes
a distribution or distributions on shares of its Common Stock or any other
equity or equity equivalent securities payable in shares of Common Stock (which,
for avoidance of doubt, shall not include any shares of Common Stock issued by
the Company upon exercise of the Warrants), (ii) subdivides outstanding shares
of Common Stock into a larger number of shares, (iii) combines (including by way
of reverse stock split) outstanding shares of Common Stock into a smaller number
of shares, or (iv) issues by reclassification of shares of the Common Stock any
shares of capital stock of the Company, then in each case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock and such other capital stock of the Company (excluding
treasury shares, if any) outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock and such other
capital stock of the Company (excluding treasury shares, if any) outstanding
immediately after such event, and the number of shares issuable upon exercise of
each Warrant shall be proportionately adjusted such that the aggregate Exercise
Price of such Warrant shall remain unchanged. Any adjustment made pursuant to
this Section 4.1 shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification.

 

4.2 Adjustment for Other Distributions. (a) Subsequent Rights Offerings. In
addition to any adjustments pursuant to Section 4.1 above, if at any time the
Company grants, issues or sells any Common Stock Equivalents or rights to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of shares of Common Stock (the “Purchase Rights”), then the
Holder will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which the Holder could have acquired if
the Holder had held the number of shares of Common Stock acquirable upon
complete exercise of a Warrant (without regard to any limitations on exercise
hereof, including without limitation, the Beneficial Ownership Limitation)
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of shares of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights (provided, however, to the extent
that the Holder’s right to participate in any such Purchase Right would result
in the Holder exceeding the Beneficial Ownership Limitation, then the Holder
shall not be entitled to participate in such Purchase Right to such extent (or
beneficial ownership of such shares of Common Stock as a result of such Purchase
Right to such extent) and such Purchase Right to such extent shall be held in
abeyance for the Holder until such time, if ever, as its right thereto would not
result in the Holder exceeding the Beneficial Ownership Limitation).

 

(b) Dividends. If the Company, at any time during the Exercise Period, shall pay
a dividend in cash, securities or other assets to all holders of Common Stock
(or other shares of the Company’s capital stock into which the Warrants are
convertible), other than a transaction described in Sections 4.1, 4.2(a) or 4.3
(any such non-excluded event being referred to herein as a “Dividend”), then the
Exercise Price shall be decreased, effective immediately after the effective
date of such Dividend, by the quotient of (i) the gross amount of cash and/or
fair market value (as determined by the Company’s Board of Directors, in good
faith) of all securities or other assets paid to the holders of Common Stock (or
other shares of the Company’s capital stock into which the Warrants are
convertible) in respect of such Dividend divided by (ii) the sum of the number
of shares of Common Stock (or other shares of the Company’s capital stock into
which the Warrants are convertible) outstanding at the time of the Dividend plus
the number of shares of Common Stock then issuable upon exercise of all
outstanding Warrants, provided, that the Exercise Price shall not be reduced
below zero.

 

8

 

 

4.3. Fundamental Transaction. If, at any time while the Warrants are
outstanding, (i) the Company, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Company with or into
another Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other disposition of all or
substantially all of its assets in one or a series of related transactions,
(iii) any, direct or indirect, purchase offer, tender offer or exchange offer
(whether by the Company or another Person) is completed pursuant to which all
holders of Common Stock are permitted to sell, tender or exchange their shares
for other securities, cash or property and has been accepted by the holders of
50% or more of the outstanding Common Stock, (iv) the Company, directly or
indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any compulsory share
exchange pursuant to which all outstanding shares of Common Stock are
effectively converted into or exchanged for other securities, cash or property,
or (v) the Company, directly or indirectly, in one or more related transactions
consummates a stock or share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person or group of Persons whereby such
other Person or group acquires more than 50% of the outstanding shares of Common
Stock (not including any shares of Common Stock held by the other Person or
other Persons making or party to, or associated or affiliated with the other
Persons making or party to, such stock or share purchase agreement or other
business combination) (each a “Fundamental Transaction”), then, upon any
subsequent exercise of a Warrant, the Holder shall have the right to receive,
for each Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental Transaction (without
regard to any limitation in Section 3.3.9 on the exercise of a 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 such amount of cash or any
other consideration (collectively, the “Alternate Consideration”) receivable as
a result of such Fundamental Transaction by a holder of the number of shares of
Common Stock for which a Warrant is exercisable immediately prior to such
Fundamental Transaction (without regard to any limitation in Section 3.3.9 on
the exercise of a Warrant). For purposes of any such exercise, the determination
of the Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of a Warrant following such Fundamental
Transaction. The Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the “Successor Entity”) to
assume in writing all of the obligations of the Company under the Warrants in
accordance with the provisions of this Section 4.3 pursuant to written
agreements prior to or during such Fundamental Transaction. Upon the occurrence
of any such Fundamental Transaction, the Successor Entity shall succeed to, and
be substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of the Warrants referring to the “Company” shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under the
Warrants with the same effect as if such Successor Entity had been named as the
Company therein.

 

Notwithstanding anything to the contrary, in the event of a Fundamental
Transaction, the Company or any Successor Entity shall, at the Holder’s option
exercisable at any time concurrently with, or within 30 days after, the
consummation of the Fundamental Transaction (or, if later, the date of the first
public announcement of the applicable contemplated Fundamental Transaction),
purchase this Warrant from the Holder by paying to the Holder an amount of cash
equal to the Black Scholes Value of the remaining unexercised portion of this
Warrant on the date of the consummation of such Fundamental Transaction;
provided, however:

 

(i) if the Fundamental Transaction is not within the Company’s control,
including not approved by the Company’s Board of Directors, the Holder shall
only be entitled to receive from the Company or any Successor Entity, as of the
date of consummation of such Fundamental Transaction, the same type or form of
consideration (and in the same proportion), at the Black Scholes Value (as
defined below) of the unexercised portion of this Warrant, that is being offered
and paid to the holders of Common Stock of the Company in connection with the
Fundamental Transaction, whether that consideration be in the form of cash,
stock or any combination thereof, or whether the holders of Common Stock are
given the choice to receive from among alternative forms of consideration in
connection with the Fundamental Transaction; and

 

(ii) if the holders of Common Stock are not offered or paid any consideration in
such Fundamental Transaction, the holders of Common Stock will be deemed to have
received common stock of the Successor Entity in such Fundamental Transaction,
which will be deemed to be common stock of the Company immediately following
such Fundamental Transaction.

 

9

 

 

“Black Scholes Value” means the value of this Warrant based on the Black and
Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P.
(“Bloomberg”) determined as of the day of consummation of the applicable
Fundamental Transaction for pricing purposes and reflecting (A) a risk-free
interest rate corresponding to the U.S. Treasury rate for a period equal to the
time between the date of the public announcement of the applicable Fundamental
Transaction and the Termination Date, (B) an expected volatility equal to the
greater of 100% and the 100 day volatility obtained from the HVT function on
Bloomberg as of the Trading Day immediately following the public announcement of
the applicable contemplated Fundamental Transaction, (C) the underlying price
per share used in such calculation shall be the greater of (i) the sum of the
price per share being offered in cash, if any, plus the value of any non-cash
consideration, if any, being offered in such Fundamental Transaction and (ii)
the greater of (x) the last VWAP immediately prior to the public announcement of
such contemplated Fundamental Transaction and (y) the last VWAP immediately
prior to the consummation of such Fundamental Transaction and (D) a remaining
option time equal to the time between the date of the public announcement of the
applicable contemplated Fundamental Transaction and the Termination Date. The
payment of the Black Scholes Value will be made by wire transfer of immediately
available funds (or such other consideration) within five Business Days of the
Holder’s election (or, if later, on the effective date of the Fundamental
Transaction).

 

The Company shall instruct the Warrant Agent in writing to mail by first class
mail, postage prepaid, to each Holder, written notice of the execution of any
such amendment, supplement or agreement with the Successor Entity. Any
supplemented or amended agreement entered into by the successor corporation or
transferee shall provide for adjustments, which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 4.3. The
Warrant Agent shall have no duty, responsibility or obligation to determine the
correctness of any provisions contained in such agreement or such notice,
including but not limited to any provisions relating either to the kind or
amount of securities or other property receivable upon exercise of warrants or
with respect to the method employed and provided therein for any adjustments,
and shall be entitled to rely conclusively for all purposes upon the provisions
contained in any such agreement. The provisions of this Section 4.3 shall
similarly apply to successive reclassifications, changes, consolidations,
mergers, sales and conveyances of the kind described above.

 

4.4. Notices to Holder.

 

(a) Adjustment to Exercise Price. Whenever the Exercise Price is adjusted
pursuant to any provision of this Section 4, the Company shall promptly deliver
to the Holder by facsimile or email a notice setting forth the Exercise Price
after such adjustment and any resulting adjustment to the number of Warrant
Shares and setting forth a brief statement of the facts requiring such
adjustment.

 

(b) Notice to Allow Exercise by Holder. If (A) the Company shall declare a
dividend (or any other distribution in whatever form) on the Common Stock, (B)
the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the granting to
all holders of the Common Stock rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (D) the approval of
any stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property, or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company, then, in each case, the Company shall cause to be
delivered by facsimile or email to the Holder at its last facsimile number or
email address as it shall appear upon the Warrant Register of the Company, at
least 20 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of
the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided that the failure to deliver such notice or any defect
therein or in the delivery thereof shall not affect the validity of the
corporate action required to be specified in such notice. To the extent that any
notice provided in this Warrant constitutes, or contains, material, non-public
information regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report
on Form 8-K. Provided such notice occurs within the Exercise Period, the Holder
shall remain entitled to exercise this Warrant during the period commencing on
the date of such notice to the effective date of the event triggering such
notice except as may otherwise be expressly set forth herein.

 

10

 

 

4.5 Other Events. If any event occurs of the type contemplated by the provisions
of Section 4.1 or 4.2 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
Adjustment Rights, phantom stock rights or other rights with equity features to
all holders of Common Stock for no consideration), then the Company’s Board of
Directors will, at its discretion and in good faith, make an adjustment in the
Exercise Price and the number of Warrant Shares or designate such additional
consideration to be deemed issuable upon exercise of a Warrant, so as to protect
the rights of the registered Holder. No adjustment to the Exercise Price will be
made pursuant to more than one sub-section of this Section 4 in connection with
a single issuance.

 

4.6. Notices of Changes in Warrant. Upon every adjustment of the Exercise Price
or the number of Warrant Shares issuable upon exercise of a Warrant, the Company
shall give written notice thereof to the Warrant Agent, which notice shall state
the Exercise Price resulting from such adjustment and the increase or decrease,
if any, in the number of Warrant Shares purchasable at such price upon the
exercise of a Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. Upon the
occurrence of any event specified in Sections 4.1 or 4.2, then, in any such
event, the Company shall give written notice to each Holder, at the last address
set forth for such holder in the Warrant Register, as of the record date or the
effective date of the event. Failure to give such notice, or any defect therein,
shall not affect the legality or validity of such event. The Warrant Agent shall
be entitled to rely conclusively on, and shall be fully protected in relying on,
any certificate, notice or instructions provided by the Company with respect to
any adjustment of the Exercise Price or the number of shares issuable upon
exercise of a Warrant, or any related matter, and the Warrant Agent shall not be
liable for any action taken, suffered or omitted to be taken by it in accordance
with any such certificate, notice or instructions or pursuant to this Warrant
Agreement. The Warrant Agent shall not be deemed to have knowledge of any such
adjustment unless and until it shall have received written notice thereof from
the Company.

 

5. Restrictive Legends; Fractional Warrants. In the event that a Warrant
Certificate surrendered for transfer bears a restrictive legend, the Warrant
Agent shall not register that transfer until the Warrant Agent has received an
opinion of counsel for the Company stating that such transfer may be made and
indicating whether the Warrants must also bear a restrictive legend upon that
transfer. The Warrant Agent shall not be required to effect any registration of
transfer or exchange which will result in the transfer of or delivery of a
Warrant Certificate for a fraction of a Warrant.

 

6. Other Provisions Relating to Rights of Holders of Warrants.

 

6.1. No Rights as Stockholder. Except as otherwise specifically provided herein,
a Holder, solely in its capacity as a holder of Warrants, shall not be entitled
to vote or receive dividends or be deemed the holder of share capital of the
Company for any purpose, nor shall anything contained in this Warrant Agreement
be construed to confer upon a Holder, solely in its capacity as the registered
holder of Warrants, any of the rights of a stockholder of the Company or any
right to vote, give or withhold consent to any corporate action (whether any
reorganization, issue of stock, reclassification of share capital,
consolidation, merger, conveyance or otherwise), receive notice of meetings,
receive dividends or subscription rights or rights to participate in new issues
of shares, or otherwise, prior to the issuance to the Holder of the Warrant
Shares which it is then entitled to receive upon the due exercise of Warrants.

 

6.2. Reservation of Common Stock. The Company shall at all times reserve and
keep available a number of its authorized but unissued shares of Common Stock
that will be sufficient to permit the exercise in full of all outstanding
Warrants issued pursuant to this Warrant Agreement.

 

7. Concerning the Warrant Agent and Other Matters.

 

7.1. Any instructions given to the Warrant Agent orally, as permitted by any
provision of this Warrant Agreement, shall be confirmed in writing by the
Company as soon as practicable. The Warrant Agent shall not be liable or
responsible and shall be fully authorized and protected for acting, or failing
to act, in accordance with any oral instructions which do not conform with the
written confirmation received in accordance with this Section 7.1.

 

11

 

 

7.2. (a) Whether or not any Warrants are exercised, for the Warrant Agent’s
services as agent for the Company hereunder, the Company shall pay to the
Warrant Agent such fees as may be separately agreed between the Company and
Warrant Agent and the Warrant Agent’s out of pocket expenses in connection with
this Warrant Agreement, including, without limitation, the fees and expenses of
the Warrant Agent’s counsel. While the Warrant Agent endeavors to maintain
out-of-pocket charges (both internal and external) at competitive rates, these
charges may not reflect actual out-of-pocket costs, and may include handling
charges to cover internal processing and use of the Warrant Agent’s billing
systems.

 

(b) All amounts owed by the Company to the Warrant Agent under this Warrant
Agreement are due within 30 days of the Company’s receipt of an invoice.
Delinquent payments are subject to a late payment charge of one and one-half
percent (1.5%) per month commencing 45 days from the invoice date. The Company
agrees to reimburse the Warrant Agent for any attorney’s fees and any other
costs associated with collecting delinquent payments.

 

(c) No provision of this Warrant Agreement shall require Warrant Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties under this Warrant Agreement or in the exercise
of its rights.

 

7.3 As agent for the Company hereunder, the Warrant Agent:

 

(a) shall have no duties or obligations other than those specifically set forth
herein or as may subsequently be agreed to in writing by the Warrant Agent and
the Company;

 

(b) shall be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value, or genuineness of the
Warrants or any Warrant Shares;

 

(c) shall not be obligated to take any legal action hereunder; if, however, the
Warrant Agent determines to take any legal action hereunder, and where the
taking of such action might, in its judgment, subject or expose it to any
expense or liability it shall not be required to act unless it has been
furnished with an indemnity reasonably satisfactory to it;

 

(d) may rely on and shall be fully authorized and protected in acting or failing
to act upon any certificate, instrument, opinion, notice, letter, telegram,
telex, facsimile transmission or other document or security delivered to the
Warrant Agent and believed by it to be genuine and to have been signed by the
proper party or parties;

 

(e) shall not be liable or responsible for any recital or statement contained in
the Registration Statement or any other documents relating thereto;

 

(f) shall not be liable or responsible for any failure on the part of the
Company to comply with any of its covenants and obligations relating to the
Warrants, including without limitation obligations under applicable securities
laws;

 

(g) may rely on and shall be fully authorized and protected in acting or failing
to act upon the written, telephonic or oral instructions with respect to any
matter relating to its duties as Warrant Agent covered by this Warrant Agreement
(or supplementing or qualifying any such actions) of officers of the Company,
and is hereby authorized and directed to accept instructions with respect to the
performance of its duties hereunder from the Company or counsel to the Company,
and may apply to the Company, for advice or instructions in connection with the
Warrant Agent’s duties hereunder, and the Warrant Agent shall not be liable for
any delay in acting while waiting for those instructions; any applications by
the Warrant Agent for written instructions from the Company may, at the option
of the Agent, set forth in writing any action proposed to be taken or omitted by
the Warrant Agent under this Warrant Agreement and the date on or after which
such action shall be taken or such omission shall be effective; the Warrant
Agent shall not be liable for any action taken by, or omission of, the Warrant
Agent in accordance with a proposal included in such application on or after the
date specified in such application (which date shall not be less than five
business days after the date such application is sent to the Company, unless the
Company shall have consented in writing to any earlier date) unless prior to
taking any such action, the Warrant Agent shall have received written
instructions in response to such application specifying the action to be taken
or omitted;

 

12

 

 

(h) may consult with counsel satisfactory to the Warrant Agent, including its
in-house counsel, and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered, or
omitted by it hereunder in good faith and in accordance with the advice of such
counsel;

 

(i) may perform any of its duties hereunder either directly or by or through
nominees, correspondents, designees, or subagents, and it shall not be liable or
responsible for any misconduct or negligence on the part of any nominee,
correspondent, designee, or subagent appointed with reasonable care by it in
connection with this Warrant Agreement;

 

(j) is not authorized, and shall have no obligation, to pay any brokers,
dealers, or soliciting fees to any person and

 

(k) shall not be required hereunder to comply with the laws or regulations of
any country other than the United States of America or any political subdivision
thereof.

 

7.4. (a) In the absence of gross negligence or willful or illegal misconduct on
its part, the Warrant Agent shall not be liable for any action taken, suffered,
or omitted by it or for any error of judgment made by it in the performance of
its duties under this Warrant Agreement. Anything in this Warrant Agreement to
the contrary notwithstanding, in no event shall Warrant Agent be liable for
special, indirect, incidental, consequential or punitive losses or damages of
any kind whatsoever (including but not limited to lost profits), even if the
Warrant Agent has been advised of the possibility of such losses or damages and
regardless of the form of action. Any liability of the Warrant Agent will be
limited in the aggregate to the amount of fees paid by the Company hereunder.
The Warrant Agent shall not be liable for any failures, delays or losses,
arising directly or indirectly out of conditions beyond its reasonable control
including, but not limited to, acts of government, exchange or market ruling,
suspension of trading, work stoppages or labor disputes, fires, civil
disobedience, riots, rebellions, storms, electrical or mechanical failure,
computer hardware or software failure, communications facilities failures
including telephone failure, war, terrorism, insurrection, earthquakes, floods,
acts of God or similar occurrences.

 

(b) In the event any question or dispute arises with respect to the proper
interpretation of the Warrants or the Warrant Agent’s duties under this Warrant
Agreement or the rights of the Company or of any Holder, the Warrant Agent shall
not be required to act and shall not be held liable or responsible for its
refusal to act until the question or dispute has been judicially settled (and,
if appropriate, it may file a suit in interpleader or for a declaratory judgment
for such purpose) by final judgment rendered by a court of competent
jurisdiction, binding on all persons interested in the matter which is no longer
subject to review or appeal, or settled by a written document in form and
substance satisfactory to Warrant Agent and executed by the Company and each
such Holder. In addition, the Warrant Agent may require for such purpose, but
shall not be obligated to require, the execution of such written settlement by
all the Holders and all other persons that may have an interest in the
settlement.

 

7.5. The Company covenants to indemnify the Warrant Agent and hold it harmless
from and against any loss, liability, claim or expense (“Loss”) arising out of
or in connection with the Warrant Agent’s duties under this Warrant Agreement,
including the costs and expenses of defending itself against any Loss, unless
such Loss shall have been determined by a court of competent jurisdiction to be
a result of the Warrant Agent’s gross negligence or willful misconduct.

 

7.6. Unless terminated earlier by the parties hereto, this Agreement shall
terminate 90 days after the earlier of the Expiration Date and the date on which
no Warrants remain outstanding (the “Termination Date”). On the business day
following the Termination Date, the Agent shall deliver to the Company any
entitlements, if any, held by the Warrant Agent under this Warrant Agreement.
The Agent’s right to be reimbursed for fees, charges and out-of-pocket expenses
as provided in this Section 8 shall survive the termination of this Warrant
Agreement.

 

7.7. If any provision of this Warrant Agreement shall be held illegal, invalid,
or unenforceable by any court, this Warrant Agreement shall be construed and
enforced as if such provision had not been contained herein and shall be deemed
an Agreement among the parties to it to the full extent permitted by applicable
law.

 

7.8. The Company represents and warrants that (a) it is duly incorporated and
validly existing under the laws of its jurisdiction of incorporation, (b) the
offer and sale of the Warrants and the execution, delivery and performance of
all transactions contemplated thereby (including this Warrant Agreement) have
been duly authorized by all necessary corporate action and will not result in a
breach of or constitute a default under the articles of association, bylaws or
any similar document of the Company or any indenture, agreement or instrument to
which it is a party or is bound, (c) this Warrant Agreement has been duly
executed and delivered by the Company and constitutes the legal, valid, binding
and enforceable obligation of the Company, (d) the Warrants will comply in all
material respects with all applicable requirements of law and (e) to the best of
its knowledge, there is no litigation pending or threatened as of the date
hereof in connection with the offering of the Warrants.

 

13

 

 

7.9. In the event of inconsistency between this Warrant Agreement and the
descriptions in the Registration Statement, as they may from time to time be
amended, the terms of this Warrant Agreement shall control.

 

7.10. Set forth in Annex D hereto is a list of the names and specimen signatures
of the persons authorized to act for the Company under this Warrant Agreement
(the “Authorized Representatives”). The Company shall, from time to time,
certify to you the names and signatures of any other persons authorized to act
for the Company under this Warrant Agreement.

 

7.11. Any notice, statement or demand authorized by this Warrant Agreement to be
given or made by the Warrant Agent or by the holder of any Warrant to or on the
Company including, without limitation, any Notice of Exercise, shall be in
writing and delivered by e-mail, hand or sent by a nationally recognized
overnight courier service, addressed (until another address is filed in writing
by the Company with the Warrant Agent) as set forth below and if to any holder
any notice, statement or demand shall be given to the last address set forth for
such holder (if any) in the Warrant Register:

 

FAT Brands Inc.

9720 Wilshire Blvd., Suite 500

Beverly Hills, CA 90212

Attn: Corporate Secretary

Email: ceo@fatbrands.com or cfo@fatbrands.com

 

Any notice, statement or demand authorized by this Warrant Agreement to be given
or made by the holder of any Warrant or by the Company to or on the Warrant
Agent including, without limitation, any Notice of Exercise, shall be in writing
and delivered by e-mail, facsimile, hand or sent by a nationally recognized
overnight courier service, addressed (until another address is filed in writing
by the Warrant Agent with the Company), as follows:

 

VStock Transfer, LLC

18 Lafayette Place

Woodmere, NY 11598

Attention: Warrant Department

Facsimile: (646) 536-3179

Email: info@vstocktransfer.com or 0-K@vstocktransfer.com

 

Any notice or other communication or deliveries hereunder shall be deemed given
and effective on the earliest of (i) the time of transmission, if such notice or
communication is delivered via facsimile at the facsimile number or e-mail at
the e-mail address set forth above in this Section prior to 5:30 p.m. (New York
City time) on any date, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number or e-mail at the e-mail address set forth in this Section on a
day that is not a Trading Day or later than 5:30 p.m. (New York City time) on
any Trading Day, (iii) the second Trading Day following the date of mailing, if
sent by U.S. nationally recognized overnight courier service, or (iv) upon
actual receipt by the party to whom such notice is required to be given.
Notwithstanding any other provision of this Warrant, where this Warrant provides
for notice of any event to the Holder, if this Warrant is held in global form by
DTC (or any successor depositary), such notice shall be sufficiently given if
given to DTC (or any successor depositary) pursuant to the procedures of DTC (or
such successor depositary), subject to a Holder’s right to elect to receive a
Warrant in certificated form pursuant to the terms of the Warrant Agency
Agreement, in which case this sentence shall not apply.

 

7.12. (a) This Warrant Agreement shall be governed by and construed in
accordance with the laws of the State of New York. All actions and proceedings
relating to or arising from, directly or indirectly, this Warrant Agreement may
be litigated in courts located within the Borough of Manhattan in the City and
State of New York. The Company hereby submits to the personal jurisdiction of
such courts and consents that any service of process may be made by certified or
registered mail, return receipt requested, directed to the Company at its
address last specified for notices hereunder.

 

14

 

 

(b) This Warrant Agreement shall inure to the benefit of and be binding upon the
successors and assigns of the parties hereto. This Warrant Agreement may not be
assigned, or otherwise transferred, in whole or in part, by either party without
the prior written consent of the other party, which the other party will not
unreasonably withhold, condition or delay; except that (i) consent is not
required for an assignment or delegation of duties by Warrant Agent to any
affiliate of Warrant Agent and (ii) any reorganization, merger, consolidation,
sale of assets or other form of business combination by Warrant Agent or the
Company shall not be deemed to constitute an assignment of this Warrant
Agreement.

 

(c) No provision of this Warrant Agreement may be amended, modified or waived,
except in a written document signed by both parties. The Company and the Warrant
Agent may amend or supplement this Warrant Agreement without the consent of any
Holder for the purpose of curing any ambiguity, or curing, correcting or
supplementing any defective provision contained herein or adding or changing any
other provisions with respect to matters or questions arising under this
Agreement as the parties may deem necessary or desirable and that the parties
determine, in good faith, shall not adversely affect the interest of the
Holders. All other amendments and supplements shall require the vote or written
consent of Holders of at least 50.1% of the then outstanding Warrants, provided
that adjustments may be made to the Warrant terms and rights in accordance with
Section 4 without the consent of the Holders.

 

7.13 Payment of Taxes. The Company will from time to time promptly pay all taxes
and charges that may be imposed upon the Company or the Warrant Agent in respect
of the issuance or delivery of Warrant Shares upon the exercise of Warrants, but
the Company may require the Holders to pay any transfer taxes in respect of the
Warrants or such shares. The Warrant Agent may refrain from registering any
transfer of Warrants or any delivery of any Warrant Shares unless or until the
persons requesting the registration or issuance shall have paid to the Warrant
Agent for the account of the Company the amount of such tax or charge, if any,
or shall have established to the reasonable satisfaction of the Company and the
Warrant Agent that such tax or charge, if any, has been paid.

 

7.14 Resignation of Warrant Agent.

 

7.14.1. Appointment of Successor Warrant Agent. The Warrant Agent, or any
successor to it hereafter appointed, may resign its duties and be discharged
from all further duties and liabilities hereunder after giving thirty (30) days’
notice in writing to the Company, or such shorter period of time agreed to by
the Company. The Company may terminate the services of the Warrant Agent, or any
successor Warrant Agent, after giving thirty (30) days’ notice in writing to the
Warrant Agent or successor Warrant Agent, or such shorter period of time as
agreed. If the office of the Warrant Agent becomes vacant by resignation,
termination or incapacity to act or otherwise, the Company shall appoint in
writing a successor Warrant Agent in place of the Warrant Agent. If the Company
shall fail to make such appointment within a period of 30 days after it has been
notified in writing of such resignation or incapacity by the Warrant Agent, then
the Warrant Agent or any Holder may apply to any court of competent jurisdiction
for the appointment of a successor Warrant Agent at the Company’s cost. Pending
appointment of a successor to such Warrant Agent, either by the Company or by
such a court, the duties of the Warrant Agent shall be carried out by the
Company. Any successor Warrant Agent (but not including the initial Warrant
Agent), whether appointed by the Company or by such court, shall be a person
organized and existing under the laws of any state of the United States of
America, in good standing, and authorized under such laws to exercise corporate
trust powers and subject to supervision or examination by federal or state
authority. After appointment, any successor Warrant Agent shall be vested with
all the authority, powers, rights, immunities, duties, and obligations of its
predecessor Warrant Agent with like effect as if originally named as Warrant
Agent hereunder, without any further act or deed, and except for executing and
delivering documents as provided in the sentence that follows, the predecessor
Warrant Agent shall have no further duties, obligations, responsibilities or
liabilities hereunder, but shall be entitled to all rights that survive the
termination of this Warrant Agreement and the resignation or removal of the
Warrant Agent, including but not limited to its right to indemnity hereunder. If
for any reason it becomes necessary or appropriate or at the request of the
Company, the predecessor Warrant Agent shall execute and deliver, at the expense
of the Company, an instrument transferring to such successor Warrant Agent all
the authority, powers, and rights of such predecessor Warrant Agent hereunder;
and upon request of any successor Warrant Agent the Company shall make, execute,
acknowledge, and deliver any and all instruments in writing for more fully and
effectually vesting in and confirming to such successor Warrant Agent all such
authority, powers, rights, immunities, duties, and obligations.

 

15

 

 

7.14.2. Notice of Successor Warrant Agent. In the event a successor Warrant
Agent shall be appointed, the Company shall give notice thereof to the
predecessor Warrant Agent and the transfer agent for the Common Stock not later
than the effective date of any such appointment.

 

7.14.3. Merger or Consolidation of Warrant Agent. Any person into which the
Warrant Agent may be merged or converted or with which it may be consolidated or
any person resulting from any merger, conversion or consolidation to which the
Warrant Agent shall be a party or any person succeeding to the shareowner
services business of the Warrant Agent or any successor Warrant Agent shall be
the successor Warrant Agent under this Warrant Agreement, without any further
act or deed. For purposes of this Warrant Agreement, “person” shall mean any
individual, firm, corporation, partnership, limited liability company, joint
venture, association, trust or other entity, and shall include any successor (by
merger or otherwise) thereof or thereto.

 

8. Miscellaneous Provisions.

 

8.1. Persons Having Rights under this Warrant Agreement. Nothing in this Warrant
Agreement expressed and nothing that may be implied from any of the provisions
hereof is intended, or shall be construed, to confer upon, or give to, any
person or corporation other than the parties hereto and the Holders any right,
remedy, or claim under or by reason of this Warrant Agreement or of any
covenant, condition, stipulation, promise, or agreement hereof.

 

8.2. Examination of the Warrant Agreement. A copy of this Warrant Agreement
shall be available at all reasonable times at the office of the Warrant Agent
designated for such purpose for inspection by any Holder. Prior to such
inspection, the Warrant Agent may require any such holder to provide reasonable
evidence of its interest in the Warrants.

 

8.3. Counterparts. This Warrant Agreement may be executed in any number of
original, facsimile or electronic counterparts and each of such counterparts
shall for all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument.

 

8.4. Effect of Headings. The Section headings herein are for convenience only
and are not part of this Warrant Agreement and shall not affect the
interpretation thereof.

 

9. Certain Definitions.

 

As used herein, the following terms shall have the following meanings:

 

(i) “Adjustment Right” means any right granted with respect to any securities
issued in connection with, or with respect to, any issuance, sale or delivery
(or deemed issuance, sale or delivery in accordance with Section 4) of Common
Stock (other than rights of the type described in Section 4.2 and 4.3 hereof)
that could result in a decrease in the net consideration received by the Company
in connection with, or with respect to, such securities (including, without
limitation, any cash settlement rights, cash adjustment or other similar rights)
but excluding anti-dilution and other similar rights (including pursuant to
Section 4.4 of this Agreement).

 

(ii) “Trading Day” means any day on which the Common Stock is traded on the
Trading Market, or, if the Trading Market is not the principal trading market
for the Common Stock, then on the principal securities exchange or securities
market in the United States on which the Common Stock is then traded, provided
that “Trading Day” shall not include any day on which the Common Stock is are
scheduled to trade on such exchange or market for less than 4.5 hours or any day
that the Common Stock is suspended from trading during the final hour of trading
on such exchange or market (or if such exchange or market does not designate in
advance the closing time of trading on such exchange or market, then during the
hour ending at 4:00 P.M., New York City time).

 

(iii) “Trading Market” means the NYSE American, the Nasdaq Capital Market, the
Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock
Exchange (or any successors to any of the foregoing).

 

(iv) “VWAP” means, 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 L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted
average price of the Common Stock for such date (or the nearest preceding date)
on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or
quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then
reported in the “Pink Open Market” published by OTC Markets Group, Inc. (or a
similar organization or agency succeeding to its functions of reporting prices),
the most recent bid price per share of the Common Stock so reported, or (d) 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 holders of a majority
in interest of the Warrants then outstanding and reasonably acceptable to the
Company, the fees and expenses of which shall be paid by the Company.

 

[SIGNATURE PAGE FOLLOWS]

 

16

 

 

IN WITNESS WHEREOF, this Warrant Agency Agreement has been duly executed by the
parties hereto as of the day and year first above written.

 

  FAT Brands Inc.         By: /s/ Andrew Wiederhorn   Name:  Andrew Wiederhorn  
Title:  Chief Executive Officer

 

  VStock Transfer, LLC   As Warrant Agent         By: /s/ Young D. Kim   Name:
 Young D. Kim   Title:  Compliance Officer

 

Annex A Form of Global Certificate

Annex B Election to Purchase

Annex C Form of Certificated Warrant

Annex D Authorized Representatives

Annex E Form of Warrant Certificate Request Notice

 

17

 

 

ANNEX A

 

[FORM OF GLOBAL CERTIFICATE]

 

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.

 

FAT BRANDS INC.

WARRANT CERTIFICATE

NOT EXERCISABLE AFTER JULY 16, 2025

 

This certifies that the person whose name and address appears below, or
registered assigns, is the registered owner of the number of Warrants set forth
below. Each Warrant entitles its registered holder to purchase from FAT Brands
Inc., a Delaware corporation (the “Company”), at any time prior to 5:00 P.M.
(New York City time) on July 16, 2025, one share of common stock, par value
$0.0001 per share, of the Company (each, a “Warrant Share” and collectively, the
“Warrant Shares”), at an exercise price of $5.00 per share, subject to possible
adjustments as provided in the Warrant Agreement (as defined below).

 

This Warrant Certificate, with or without other Warrant Certificates, upon
surrender at the designated office of the Warrant Agent, may be exchanged for
another Warrant Certificate or Warrant Certificates evidencing the same number
of Warrants as the Warrant Certificate or Warrant Certificates surrendered. A
transfer of the Warrants evidenced hereby may be registered upon surrender of
this Warrant Certificate at the designated office of the Warrant Agent by the
registered holder in person or by a duly authorized attorney, properly endorsed
or accompanied by proper instruments of transfer, a signature guarantee, and
such other and further documentation as the Warrant Agent may reasonably request
and duly stamped as may be required by the laws of the State of New York and of
the United States of America.

 

The terms and conditions of the Warrants and the rights and obligations of the
holder of this Warrant Certificate are set forth in the Warrant Agency Agreement
dated as of July 16, 2020 (the “Warrant Agreement”) between the Company and
VStock Transfer, LLC (the “Warrant Agent”). A copy of the Warrant Agreement is
available for inspection during business hours at the office of the Warrant
Agent.

 

This Warrant Certificate shall not be valid or obligatory for any purpose until
it shall have been countersigned by an authorized signatory of the Warrant
Agent.

 

WITNESS the facsimile signature of a proper officer of the Company.

 

  FAT Brands Inc.         By:     Name:     Title:  

 

 

 

 

Dated: [●]

Countersigned:

 

VStock Transfer, LLC   As Warrant Agent         By:     Name:     Title:    

 

PLEASE DETACH HERE
——————————————————————————————————————

 

Certificate No.:_________ Number of Warrants:__________

 

WARRANT CUSIP NO.: ___________

 

    FAT Brands Inc.       [Name & Address of Holder]   VStock Transfer, LLC,
Warrant Agent           By Mail:                 By hand or overnight courier:  
   

 

 

 

 

ANNEX B

 

NOTICE OF EXERCISE

 

  TO: FAT BRANDS INC.

 

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

 

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

 

[ ] in lawful money of the United States; or

 

[ ] if permitted the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection 2(c), to
exercise this Warrant with respect to the maximum number of Warrant Shares
purchasable pursuant to the cashless exercise procedure set forth in subsection
2(c).

 

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

 

     

 

The Warrant Shares shall be delivered to the following DWAC Account Number:

 

                 

 

[SIGNATURE OF HOLDER]

 

 

Name of Investing Entity:
________________________________________________________________

 

Signature of Authorized Signatory of Investing Entity:
__________________________________________

 

Name of Authorized Signatory:
____________________________________________________________

 

Title of Authorized Signatory:
_____________________________________________________________

 

Date:
________________________________________________________________________________

 

 

 

 

ANNEX C

 

[FORM OF CERTIFICATED WARRANT]

 

COMMON STOCK PURCHASE WARRANT

 

FAT BRANDS INC.

 

Warrant Shares: _______   Issuance Date: July 16, 2020                     

 

CUSIP: ______________ ISIN: _______________

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value
received, _____________ or its assigns (the “Holder”) is entitled, upon the
terms and subject to the limitations on exercise and the conditions hereinafter
set forth, at any time during the period (the “Exercise Period”) commencing on
the earlier of (i) the one-year anniversary of the Issuance Date or (ii) the
FCCG Merger, and terminating at 5:00 P.M., New York City time on July 16, 2025,
to subscribe for and purchase from FAT Brands Inc., a Delaware corporation (the
“Company”), up to [●] shares (as subject to adjustment hereunder, the “Warrant
Shares”) of Common Stock. The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
This Warrant shall initially be issued and maintained in the form of a security
held in book-entry form and the Depository Trust Company or its nominee (“DTC”)
shall initially be the sole registered holder of this Warrant, subject to a
Holder’s right to elect to receive a Warrant in certificated form pursuant to
the terms of the Warrant Agency Agreement, in which case this sentence shall not
apply.

 

Section 1. Definitions. In addition to the terms defined elsewhere in this
Warrant, the following terms have the meanings indicated in this Section 1:

 

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 under the
Securities Act.

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value $0.0001 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed.

 

“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

“FCCG Merger” shall mean a merger, acquisition or other business combination
transaction involving Fog Cutter Capital Group, Inc. and the Company and/or its
subsidiaries.

 

“Liens” means a lien, charge pledge, security interest, encumbrance, right of
first refusal, preemptive right or other restriction.

 

C-1

 

 

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding,
such as a deposition), whether commenced or threatened.

 

“Registration Statement” means the Company’s registration statement on Form S-1
(File No. 239032).

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or
any similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“Trading Day” means a day on which the Common Stock is traded on a Trading
Market.

 

“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE
American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market or the New York Stock Exchange (or any successors to any of the
foregoing).

 

“Transfer Agent” means VStock Transfer, LLC, with a mailing address of 18
Lafayette Place, Woodmere, NY 11598 and a facsimile number of (516) ___________,
and any successor transfer agent of the Company.

 

“Warrant Agency Agreement” means that certain Warrant Agency Agreement, dated as
of the Issuance Date, between the Company and the Warrant Agent.

 

“Warrant Agent” means the Transfer Agent and any successor warrant agent of the
Company.

 

“Warrants” means this Warrant and other Common Stock Purchase Warrants issued by
the Company pursuant to the Registration Statement.

 

Section 2. Exercise.

 

a) Exercise of the purchase rights represented by this Warrant may be made, in
whole or in part, at any time or times during the Exercise Period by delivery to
the Company of a duly executed facsimile copy (or e-mail attachment) of the
Notice of Exercise in the form annexed hereto. Within the earlier of (i) two (2)
Trading Days and (ii) the number of Trading Days comprising the Standard
Settlement Period following the date of exercise as aforesaid, the Holder shall
deliver the aggregate Exercise Price for the shares specified in the applicable
Notice of Exercise by wire transfer or cashier’s check drawn on a United States
bank unless the cashless exercise procedure specified in Section 2(c) below is
specified in the applicable Notice of Exercise. No ink-original Notice of
Exercise shall be required, nor shall any medallion guarantee (or other type of
guarantee or notarization) of any Notice of Exercise form be required.
Notwithstanding anything herein to the contrary, the Holder shall not be
required to physically surrender this Warrant to the Company until the Holder
has purchased all of the Warrant Shares available hereunder and the Warrant has
been exercised in full, in which case, the Holder shall surrender this Warrant
to the Company for cancellation within three (3) Trading Days of the date the
final Notice of Exercise is delivered to the Company. Partial exercises of this
Warrant resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the outstanding
number of Warrant Shares purchasable hereunder in an amount equal to the
applicable number of Warrant Shares purchased. The Holder and the Company shall
maintain records showing the number of Warrant Shares purchased and the date of
such purchases. The Company shall deliver any objection to any Notice of
Exercise within one (1) Trading Day of receipt of such notice. The Holder and
any assignee, by acceptance of this Warrant, acknowledge and agree that, by
reason of the provisions of this paragraph, following the purchase of a portion
of the Warrant Shares hereunder, the number of Warrant Shares available for
purchase hereunder at any given time may be less than the amount stated on the
face hereof.

 

C-2

 

 

Notwithstanding the foregoing in this Section 2(a), a holder whose interest in
this Warrant is a beneficial interest in certificate(s) representing this
Warrant held in book-entry form through DTC (or another established clearing
corporation performing similar functions), shall effect exercises made pursuant
to this Section 2(a) by delivering to DTC (or such other clearing corporation,
as applicable) the appropriate instruction form for exercise, complying with the
procedures to effect exercise that are required by DTC (or such other clearing
corporation, as applicable), subject to a Holder’s right to elect to receive a
Warrant in certificated form pursuant to the terms of the Warrant Agency
Agreement, in which case this sentence shall not apply.

 

b) Exercise Price. The exercise price per share of the Common Stock under this
Warrant shall be $5.00, subject to adjustment hereunder (the “Exercise Price”).

 

c) Cashless Exercise. If at the time of exercise hereof there is no effective
registration statement registering, or the prospectus contained therein is not
available for the issuance of the Warrant Shares to the Holder, then this
Warrant may also be exercised, in whole or in part, at such time by means of a
“cashless exercise” in which the Holder shall be entitled to receive a number of
Warrant Shares equal to the quotient (if such quotient would be a positive
number) obtained by dividing [(A-B) (X)] by (A), where:

 

(A)=the last VWAP immediately preceding the time of delivery of the Notice of
Exercise giving rise to the applicable “cashless exercise”, as set forth in the
applicable Notice of Exercise (to clarify, the “last VWAP” will be the last VWAP
as calculated over an entire Trading Day such that, in the event that this
Warrant is exercised at a time that the Trading Market is open, the prior
Trading Day’s VWAP shall be used in this calculation);

 

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

 

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

 

Notwithstanding anything herein to the contrary, the Company shall not be
required to make any cash payments or net cash settlement to the Holder in lieu
of delivery of the Warrant Shares. If Warrant Shares are issued in such a
cashless exercise, the parties acknowledge and agree that in accordance with
Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the
registered characteristics of the Warrants being exercised. The Company agrees
not to take any position contrary to this Section 2(c).

 

“VWAP” means, 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 L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted
average price of the Common Stock for such date (or the nearest preceding date)
on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or
quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then
reported in the “Pink Open Market” published by OTC Markets Group, Inc. (or a
similar organization or agency succeeding to its functions of reporting prices),
the most recent bid price per share of the Common Stock so reported, or (d) 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 holders of a majority
in interest of the Warrants then outstanding and reasonably acceptable to the
Company, the fees and expenses of which shall be paid by the Company.

 

Notwithstanding anything herein to the contrary, on the Termination Date, this
Warrant shall be automatically exercised via cashless exercise pursuant to this
Section 2(c).

 

C-3

 

 

d) Mechanics of Exercise.

 

i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant
Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder
by crediting the account of the Holder’s or its designee’s balance account with
The Depository Trust Company through its Deposit or Withdrawal at Custodian
system (“DWAC”) if the Company is then a participant in such system and either
(A) there is an effective registration statement permitting the issuance of the
Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant
is being exercised via cashless exercise, and otherwise by physical delivery of
a certificate, registered in the Company’s share register in the name of the
Holder or its designee, for the number of Warrant Shares to which the Holder is
entitled pursuant to such exercise to the address specified by the Holder in the
Notice of Exercise by the date that is earlier of (i) two (2) Trading Days after
the delivery to the Company of the Notice of Exercise and (ii) the number of
Trading Days comprising the Standard Settlement Period after the delivery to the
Company of the Notice of Exercise (such date, the “Warrant Share Delivery
Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for
all corporate purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised, irrespective of the date
of delivery of the Warrant Shares, provided that payment of the aggregate
Exercise Price (other than in the case of a cashless exercise) is received the
earlier of (i) two (2) Trading Days of and (ii) the number of Trading Days
comprising the Standard Settlement Period following the delivery of the Notice
of Exercise. If the Company fails for any reason to deliver to the Holder the
Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery
Date, the Company shall pay to the Holder, in cash, as liquidated damages and
not as a penalty, for each $1,000 of Warrant Shares subject to such exercise
(based on the VWAP of the Common Stock on the date of the applicable Notice of
Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth
Trading Day after such liquidated damages begin to accrue) for each Trading Day
after such Warrant Share Delivery Date until such Warrant Shares are delivered
or Holder rescinds such exercise. The Company agrees to maintain a transfer
agent that is a participant in the FAST program so long as this Warrant remains
outstanding and exercisable. As used herein, “Standard Settlement Period” means
the standard settlement period, expressed in a number of Trading Days, on the
Company’s primary Trading Market with respect to the Common Stock as in effect
on the date of delivery of the Notice of Exercise.

 

ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been
exercised in part, the Company shall, at the request of a Holder and upon
surrender of this Warrant certificate, at the time of delivery of the Warrant
Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder
to purchase the unpurchased Warrant Shares called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant.

 

iii. Rescission Rights. If the Company fails to cause the Transfer Agent to
transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the
Warrant Share Delivery Date, then the Holder will have the right to rescind such
exercise.

 

iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon
Exercise. In addition to any other rights available to the Holder, if the
Company fails to cause the Transfer Agent to transmit to the Holder the Warrant
Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an
exercise on or before the Warrant Share Delivery Date, and if after such date
the Holder is required by its broker to purchase (in an open market transaction
or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of
Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant
Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”),
then the Company shall (A) pay in cash to the Holder the amount, if any, by
which (x) the Holder’s total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased exceeds (y) the amount obtained
by multiplying (1) the number of Warrant Shares that the Company was required to
deliver to the Holder in connection with the exercise at issue times (2) the
price at which the sell order giving rise to such purchase obligation was
executed, and (B) at the option of the Holder, either reinstate the portion of
the Warrant and equivalent number of Warrant Shares for which such exercise was
not honored (in which case such exercise shall be deemed rescinded) or deliver
to the Holder the number of shares of Common Stock that would have been issued
had the Company timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (A) of the immediately
preceding sentence the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the Company,
evidence of the amount of such loss. Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver shares
of Common Stock upon exercise of the Warrant as required pursuant to the terms
hereof.

 

C-4

 

 

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

 

vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made
without charge to the Holder for any issue or transfer tax or other incidental
expense in respect of the issuance of such Warrant Shares, all of which taxes
and expenses shall be paid by the Company, and such Warrant Shares shall be
issued in the name of the Holder or in such name or names as may be directed by
the Holder; provided, however, that in the event Warrant Shares are to be issued
in a name other than the name of the Holder, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached hereto duly
executed by the Holder and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax incidental
thereto. The Company shall pay all Transfer Agent fees required for same-day
processing of any Notice of Exercise and all fees to the Depository Trust
Company (or another established clearing corporation performing similar
functions) required for same-day electronic delivery of the Warrant Shares.

 

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

 

e) Holder’s Exercise Limitations. The Company shall not effect any exercise of
this Warrant, and a Holder shall not have the right to exercise any portion of
this Warrant, pursuant to Section 2 or otherwise, to the extent that after
giving effect to such issuance after exercise as set forth on the applicable
Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any
other Persons acting as a group together with the Holder or any of the Holder’s
Affiliates (such Persons, “Attribution Parties”)), would beneficially own in
excess of the Beneficial Ownership Limitation (as defined below). For purposes
of the foregoing sentence, the number of shares of Common Stock beneficially
owned by the Holder and its Affiliates and Attribution Parties shall include the
number of shares of Common Stock issuable upon exercise of this Warrant with
respect to which such determination is being made, but shall exclude the number
of shares of Common Stock which would be issuable upon (i) exercise of the
remaining, non-exercised portion of this Warrant beneficially owned by the
Holder or any of its Affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or non-converted portion of any other securities
of the Company (including, without limitation, any other Common Stock
Equivalents) subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder or any of its
Affiliates or Attribution Parties. Except as set forth in the preceding
sentence, for purposes of this Section 2(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder, it being acknowledged by the Holder that
the Company is not representing to the Holder that such calculation is in
compliance with Section 13(d) of the Exchange Act and the Holder is solely
responsible for any schedules required to be filed in accordance therewith. To
the extent that the limitation contained in this Section 2(e) applies, the
determination of whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates and Attribution
Parties) and of which portion of this Warrant is exercisable shall be in the
sole discretion of the Holder, and the submission of a Notice of Exercise shall
be deemed to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder together with
any Affiliates and Attribution Parties) and of which portion of this Warrant is
exercisable, in each case subject to the Beneficial Ownership Limitation, and
the Company shall have no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group status as
contemplated above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. For purposes
of this Section 2(e), in determining the number of outstanding shares of Common
Stock, a Holder may rely on the number of outstanding shares of Common Stock as
reflected in (A) the Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public announcement by the
Company or (C) a more recent written notice by the Company or the Transfer Agent
setting forth the number of shares of Common Stock outstanding. Upon the written
or oral request of a Holder, the Company shall within two Trading Days confirm
orally and in writing to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or exercise of securities of
the Company, including this Warrant, by the Holder or its Affiliates or
Attribution Parties since the date as of which such number of outstanding shares
of Common Stock was reported. The “Beneficial Ownership Limitation” shall be
4.99% (or, upon election by a Holder prior to the issuance of any Warrants,
9.99%) of the number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock issuable upon exercise
of this Warrant. The Holder, upon notice to the Company, may increase or
decrease the Beneficial Ownership Limitation provisions of this Section 2(e),
provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of
the number of shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of this Warrant
held by the Holder and the provisions of this Section 2(e) shall continue to
apply. Any increase in the Beneficial Ownership Limitation will not be effective
until the 61st day after such notice is delivered to the Company. The provisions
of this paragraph shall be construed and implemented in a manner otherwise than
in strict conformity with the terms of this Section 2(e) to correct this
paragraph (or any portion hereof) which may be defective or inconsistent with
the intended Beneficial Ownership Limitation herein contained or to make changes
or supplements necessary or desirable to properly give effect to such
limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.

 

C-5

 

 

Section 3. Certain Adjustments.

 

a) Stock Dividends and Splits. If the Company, at any time while this Warrant is
outstanding: (i) pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the Company upon
exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock
into a larger number of shares, (iii) combines (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of shares,
or (iv) issues by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock and such other capital stock of the Company (excluding treasury
shares, if any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock and such other capital
stock of the Company (excluding treasury shares, if any) outstanding immediately
after such event, and the number of shares issuable upon exercise of this
Warrant shall be proportionately adjusted such that the aggregate Exercise Price
of this Warrant shall remain unchanged. Any adjustment made pursuant to this
Section 3(a) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.

 

b) Subsequent Rights Offerings. In addition to any adjustments pursuant to
Section 3(a) above, if at any time the Company grants, issues or sells any
Common Stock Equivalents or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of shares of Common
Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon
the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which the Holder could have acquired if the Holder had held the number of shares
of Common Stock acquirable upon complete exercise of this Warrant (without
regard to any limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares of Common
Stock are to be determined for the grant, issue or sale of such Purchase Rights
(provided, however, to the extent that the Holder’s right to participate in any
such Purchase Right would result in the Holder exceeding the Beneficial
Ownership Limitation, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such shares of
Common Stock as a result of such Purchase Right to such extent) and such
Purchase Right to such extent shall be held in abeyance for the Holder until
such time, if ever, as its right thereto would not result in the Holder
exceeding the Beneficial Ownership Limitation).

 

c) Dividends. If the Company, at any time during the Exercise Period, shall pay
a dividend in cash, securities or other assets to all holders of Common Stock
(or other shares of the Company’s capital stock into which the Warrants are
convertible), other than a transaction described in Sections 3(a), 3(b) or 3(d)
(any such non-excluded event being referred to herein as a “Dividend”), then the
Exercise Price shall be decreased, effective immediately after the effective
date of such Dividend, by the quotient of (i) the gross amount of cash and/or
fair market value (as determined by the Company’s Board of Directors, in good
faith) of all securities or other assets paid to the holders of Common Stock (or
other shares of the Company’s capital stock into which the Warrants are
convertible) in respect of such Dividend divided by (ii) the sum of the number
of shares of Common Stock (or other shares of the Company’s capital stock into
which the Warrants are convertible) outstanding at the time of the Dividend plus
the number of shares of Common Stock then issuable upon exercise of all
outstanding Warrants, provided, that the Exercise Price shall not be reduced
below zero.

 

C-6

 

 

d) Fundamental Transaction. If, at any time while this Warrant is outstanding,
(i) the Company, directly or indirectly, in one or more related transactions
effects any merger or consolidation of the Company with or into another Person,
(ii) the Company, directly or indirectly, effects any sale, lease, license,
assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any, direct
or indirect, purchase offer, tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which all holders of Common
Stock are permitted to sell, tender or exchange their shares for other
securities, cash or property and has been accepted by the holders of 50% or more
of the outstanding Common Stock, (iv) the Company, directly or indirectly, in
one or more related transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share exchange pursuant
to which all outstanding shares of Common Stock are effectively converted into
or exchanged for other securities, cash or property, or (v) the Company,
directly or indirectly, in one or more related transactions consummates a stock
or share purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person or group of Persons whereby such other Person
or group acquires more than 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the other Person or other Persons
making or party to, or associated or affiliated with the other Persons making or
party to, such stock or share purchase agreement or other business combination)
(each a “Fundamental Transaction”), then, upon any subsequent exercise of this
Warrant, the Holder shall have the right to receive, for each Warrant Share that
would have been issuable upon such exercise immediately prior to the occurrence
of such Fundamental Transaction (without regard to any limitation in Section
2(e) on the 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 such amount of cash or any other consideration (collectively,
the “Alternate Consideration”) receivable as a result of such Fundamental
Transaction by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise of this
Warrant). For purposes of any such exercise, the determination of the Exercise
Price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect of one share
of Common Stock in such Fundamental Transaction, and the Company shall apportion
the Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such Fundamental
Transaction. The Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the “Successor Entity”) to
assume in writing all of the obligations of the Company under this Warrant in
accordance with the provisions of this Section 3(d) pursuant to written
agreements prior to or during such Fundamental Transaction. Upon the occurrence
of any such Fundamental Transaction, the Successor Entity shall succeed to, and
be substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of the Warrants referring to the “Company” shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under the
Warrants with the same effect as if such Successor Entity had been named as the
Company therein.

 

Notwithstanding anything to the contrary, in the event of a Fundamental
Transaction, the Company or any Successor Entity shall, at the Holder’s option
exercisable at any time concurrently with, or within 30 days after, the
consummation of the Fundamental Transaction (or, if later, the date of the first
public announcement of the applicable contemplated Fundamental Transaction),
purchase this Warrant from the Holder by paying to the Holder an amount of cash
equal to the Black Scholes Value of the remaining unexercised portion of this
Warrant on the date of the consummation of such Fundamental Transaction;
provided, however:

 

(i) if the Fundamental Transaction is not within the Company’s control,
including not approved by the Company’s Board of Directors, the Holder shall
only be entitled to receive from the Company or any Successor Entity, as of the
date of consummation of such Fundamental Transaction, the same type or form of
consideration (and in the same proportion), at the Black Scholes Value (as
defined below) of the unexercised portion of this Warrant, that is being offered
and paid to the holders of Common Stock of the Company in connection with the
Fundamental Transaction, whether that consideration be in the form of cash,
stock or any combination thereof, or whether the holders of Common Stock are
given the choice to receive from among alternative forms of consideration in
connection with the Fundamental Transaction; and

 

(ii) if the holders of Common Stock are not offered or paid any consideration in
such Fundamental Transaction, the holders of Common Stock will be deemed to have
received common stock of the Successor Entity in such Fundamental Transaction,
which will be deemed to be common stock of the Company immediately following
such Fundamental Transaction.

 

“Black Scholes Value” means the value of this Warrant based on the Black and
Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P.
(“Bloomberg”) determined as of the day of consummation of the applicable
Fundamental Transaction for pricing purposes and reflecting (A) a risk-free
interest rate corresponding to the U.S. Treasury rate for a period equal to the
time between the date of the public announcement of the applicable Fundamental
Transaction and the Termination Date, (B) an expected volatility equal to the
greater of 100% and the 100 day volatility obtained from the HVT function on
Bloomberg as of the Trading Day immediately following the public announcement of
the applicable contemplated Fundamental Transaction, (C) the underlying price
per share used in such calculation shall be the greater of (i) the sum of the
price per share being offered in cash, if any, plus the value of any non-cash
consideration, if any, being offered in such Fundamental Transaction and (ii)
the greater of (x) the last VWAP immediately prior to the public announcement of
such contemplated Fundamental Transaction and (y) the last VWAP immediately
prior to the consummation of such Fundamental Transaction and (D) a remaining
option time equal to the time between the date of the public announcement of the
applicable contemplated Fundamental Transaction and the Termination Date. The
payment of the Black Scholes Value will be made by wire transfer of immediately
available funds (or such other consideration) within five Business Days of the
Holder’s election (or, if later, on the effective date of the Fundamental
Transaction).

 

C-7

 

 

e) Calculations. All calculations under this Section 3 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 3, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding treasury shares, if any) issued and outstanding.

 

f) Notice to Holder.

 

i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted
pursuant to any provision of this Section 3, the Company shall promptly deliver
to the Holder by facsimile or email a notice setting forth the Exercise Price
after such adjustment and any resulting adjustment to the number of Warrant
Shares and setting forth a brief statement of the facts requiring such
adjustment.

 

ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a
dividend (or any other distribution in whatever form) on the Common Stock, (B)
the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the granting to
all holders of the Common Stock rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (D) the approval of
any stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property, or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company, then, in each case, the Company shall cause to be
delivered by facsimile or email to the Holder at its last facsimile number or
email address as it shall appear upon the Warrant Register of the Company, at
least 20 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of
the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided that the failure to deliver such notice or any defect
therein or in the delivery thereof shall not affect the validity of the
corporate action required to be specified in such notice. To the extent that any
notice provided in this Warrant constitutes, or contains, material, non-public
information regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report
on Form 8-K. Provided such notice occurs within the Exercise Period, the Holder
shall remain entitled to exercise this Warrant during the period commencing on
the date of such notice to the effective date of the event triggering such
notice except as may otherwise be expressly set forth herein.

 

Section 4. Transfer of Warrant.

 

a) Transferability. 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 or its designated agent, together with a written assignment of this
Warrant substantially in the form attached hereto duly executed by the Holder or
its agent or attorney and funds sufficient to pay any transfer taxes payable
upon the making of such transfer. Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall issue to the
assignor a new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be cancelled. Notwithstanding anything herein to
the contrary, the Holder shall not be required to physically surrender this
Warrant to the Company unless the Holder has assigned this Warrant in full, in
which case, the Holder shall surrender this Warrant to the Company within three
(3) Trading Days of the date the Holder delivers an assignment form to the
Company assigning this Warrant full. The Warrant, if properly assigned in
accordance herewith, may be exercised by a new holder for the purchase of
Warrant Shares without having a new Warrant issued.

 

C-8

 

 

b) New Warrants. If this Warrant is not held in global form through DTC (or any
successor depository), this Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and deliver
a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice. All Warrants issued on transfers or
exchanges shall be dated the original Issuance Date of this Warrant and shall be
identical with this Warrant except as to the number of Warrant Shares issuable
pursuant thereto.

 

c) Warrant Register. The Warrant Agent shall register this Warrant, upon records
to be maintained by the Warrant Agent for that purpose (the “Warrant Register”),
in the name of the record Holder hereof from time to time. The Company and the
Warrant Agent may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, absent actual notice to the contrary.

 

Section 5. Miscellaneous.

 

a) No Rights as Stockholder Until Exercise. This Warrant does not entitle the
Holder to any voting rights, dividends or other rights as a stockholder of the
Company prior to the exercise hereof as set forth in Section 2(d)(i), except as
expressly set forth in Section 3.

 

b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that
upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant or any stock certificate
relating to the Warrant Shares, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it, and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new Warrant or stock certificate of like tenor and dated
as of such cancellation, in lieu of such Warrant or stock certificate.

 

c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall not be a Business Day, then, such action may be taken or such right may be
exercised on the next succeeding Business Day.

 

d) 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 issuing the necessary Warrant Shares upon the exercise
of the purchase rights under this Warrant. The Company will take all such
reasonable action as may be necessary to assure that such Warrant Shares may be
issued as provided herein without violation of any applicable law or regulation,
or of any requirements of the Trading Market upon which the Common Stock may be
listed. The Company covenants that all Warrant Shares which may be issued upon
the exercise of the purchase rights represented by this Warrant will, upon
exercise of the purchase rights represented by this Warrant and payment for such
Warrant Shares in accordance herewith, be duly authorized, validly issued, fully
paid and non-assessable and free from all taxes, liens and charges created by
the Company in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).

 

C-9

 

 

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

 

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

 

e) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflict of laws thereof. Each party
agrees that all legal Proceedings concerning the interpretation, enforcement and
defense of this Warrant shall be commenced in the state and federal courts
sitting in the City of New York, Borough of Manhattan (the “New York Courts”).
Each party hereto hereby irrevocably submits to the exclusive jurisdiction of
the New York Courts for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any provision hereunder),
and hereby irrevocably waives, and agrees not to assert in any suit, action or
Proceeding, any claim that it is not personally subject to the jurisdiction of
such New York Courts, or such New York Courts are improper or inconvenient venue
for such Proceeding. If any party shall commence an action or Proceeding to
enforce any provisions of this Warrant, then the prevailing party in such action
or Proceeding shall be reimbursed by the other party for its attorneys’ fees and
other costs and expenses incurred in the investigation, preparation and
prosecution of such action or Proceeding.

 

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

 

g) 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 the Holder’s rights, powers or remedies.
Without limiting any other provision of this Warrant, if the Company willfully
and knowingly fails to comply with any provision of this Warrant, which results
in any material damages to the Holder, the Company shall pay to the Holder such
amounts as shall be sufficient to cover any costs and expenses including, but
not limited to, reasonable attorneys’ fees, including those of appellate
Proceedings, incurred by the Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.

 

h) Notices. Any and all notices or other communications or deliveries to be
provided by the Holders hereunder including, without limitation, any Notice of
Exercise, shall be in writing and delivered personally, by e-mail, or sent by a
nationally recognized overnight courier service, addressed to the Company, at
9720 Wilshire Blvd., Suite 500, Beverly Hills, CA 90212, Attn: Corporate
Secretary, facsimile number: email address: ceo@fatbrands.com and
cfo@fatbrands.com, or such other facsimile number, email address or address as
the Company may specify for such purposes by notice to the Holders. Any and all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, or sent by
a nationally recognized overnight courier service addressed to each Holder at
the facsimile number or address of such Holder appearing on the books of the
Warrant Agent. Any notice or other communication or deliveries hereunder shall
be deemed given and effective on the earliest of (i) the time of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number or e-mail at the e-mail address set forth in this Section prior to 5:30
p.m. (New York City time) on any date, (ii) the next Trading Day after the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile number or e-mail at the e-mail address set forth in this Section
on a day that is not a Trading Day or later than 5:30 p.m. (New York City time)
on any Trading Day, (iii) the second Trading Day following the date of mailing,
if sent by U.S. nationally recognized overnight courier service, or (iv) upon
actual receipt by the party to whom such notice is required to be given.
Notwithstanding any other provision of this Warrant, where this Warrant provides
for notice of any event to the Holder, if this Warrant is held in global form by
DTC (or any successor depositary), such notice shall be sufficiently given if
given to DTC (or any successor depositary) pursuant to the procedures of DTC (or
such successor depositary), subject to a Holder’s right to elect to receive a
Warrant in certificated form pursuant to the terms of the Warrant Agency
Agreement, in which case this sentence shall not apply.

 

C-10

 

 

i) Warrant Agency Agreement. If this Warrant is held in global form through DTC
(or any successor depositary), this Warrant is issued subject to the Warrant
Agency Agreement. To the extent any provision of this Warrant conflicts with the
express provisions of the Warrant Agency Agreement, the provisions of this
Warrant shall govern and be controlling.

 

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

 

k) Remedies. The Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Warrant and hereby agrees to waive and
not to assert the defense in any action for specific performance that a remedy
at law would be adequate.

 

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

 

m) Amendment. This Warrant may be modified or amended or the provisions hereof
waived with the written consent of the Company, on the one hand, and either: (i)
the Holder or the beneficial owner of this Warrant, on the other hand, or (ii)
the vote or written consent of the Holders of at least 50.1% of the then
outstanding Warrants issued pursuant to the Warrant Agency Agreement, on the
other hand, provided that adjustments may be made to the Warrant terms and
rights of this Warrant in accordance with Section 3 of this Warrant without the
consent of any Holder or beneficial owner of the Warrants..

 

n) 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.

 

o) 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)

 

C-11

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized as of the date first above indicated.

 

  FAT Brands inc.         By:       Name:     Title:  

 

C-12

 

 

NOTICE OF EXERCISE

 

  TO: FAT BRANDS INC.

 

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

 

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

 

[  ] in lawful money of the United States; or

 

[  ] if permitted the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection 2(c), to
exercise this Warrant with respect to the maximum number of Warrant Shares
purchasable pursuant to the cashless exercise procedure set forth in subsection
2(c).

 

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

 

     

 

The Warrant Shares shall be delivered to the following DWAC Account Number:

 

                 

 

[SIGNATURE OF HOLDER]

 

Name of Investing Entity:
________________________________________________________________

 

Signature of Authorized Signatory of Investing Entity:
__________________________________________

 

Name of Authorized Signatory:
____________________________________________________________

 

Title of Authorized Signatory:
_____________________________________________________________

 

Date:
________________________________________________________________________________

 

C-13

 

 

ASSIGNMENT FORM

 

(To assign the foregoing Warrant, execute this form and supply required
information. Do not use this form to purchase shares.)

 

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

 

Name:           (Please Print)           Address:           (Please Print)      
    Phone Number:               Email Address:               Dated:
_____________________ __, ______               Holder’s Signature:              
    Holder’s Address:        

 

C-14

 

 

ANNEX D

 

AUTHORIZED REPRESENTATIVES

 

Name   Title   Signature Andrew Wiederhorn   Chief Executive Officer     Rebecca
Hershinger    Chief Financial Officer    

 

 

 

 

ANNEX E

 

WARRANT CERTIFICATE REQUEST NOTICE

 

  To: VStock Transfer, LLC, as Warrant Agent for FAT Brands Inc. (the “Company”)

 

The undersigned Holder of Common Stock Purchase Warrants (“Warrants”) in the
form of Global Warrants issued by the Company hereby elects to receive a
Definitive Certificate evidencing the Warrants held by the Holder as specified
below:

 

1 Name of Holder of Warrants in form of Global Warrants:     2) Name of Holder
in Definitive Certificate (if different from name of Holder of Warrants in form
of Global Warrants):     3) Number of Warrants in name of Holder in form of
Global Warrants:     4) Number of Warrants for which Definitive Certificate
shall be issued:     5) Number of Warrants in name of Holder in form of Global
Warrants after issuance of

 

Definitive Certificate, if any:

 

6) Definitive Certificate shall be delivered to the following address:

 

                       

 

The undersigned hereby acknowledges and agrees that, in connection with this
Warrant Exchange and the issuance of the Definitive Certificate, the Holder is
deemed to have surrendered the number of Warrants in form of Global Warrants in
the name of the Holder equal to the number of Warrants evidenced by the
Definitive Certificate.

 

[SIGNATURE OF HOLDER]

 

Name of Investing Entity: _____________________________________

 

Signature of Authorized Signatory of Investing Entity:
_____________________________

 

Name of Authorized Signatory: _____________________________________

 

Title of Authorized Signatory: _____________________________________

 

Date:____________________________________