EXHIBIT 10.20

 

1847 HOLDINGS LLC

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”) is made as of April 5, 2019
by and between 1847 HOLDINGS LLC, a Delaware limited liability company (“the
“Company”), 1847 GOEDEKER HOLDCO INC., a Delaware corporation and majority-owned
subsidiary of the Company (“Holdco”), 1847 GOEDEKER INC., a Delaware corporation
and wholly-owned subsidiary of Holdco (“1847 Goedeker” and collectively with the
Company and Holdco, “1847”) and LEONITE CAPITAL LLC, a Delaware limited
liability company (the “Purchaser”).

 

RECITAL

 

A. The parties hereto are executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by Section 4(a)(2) of
the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506(b)
promulgated by the United States Securities and Exchange Commission (the “SEC”)
under the Securities Act;

 

B. The Purchaser desires to purchase from 1847, and 1847 desires to issue and
sell to the Purchaser, upon the terms and conditions set forth in this
Agreement, a Secured Convertible Promissory Note of 1847, in the aggregate
principal amount of Seven Hundred Fourteen Thousand Two Hundred Eighty-Five and
71/100 Dollars ($714,285.71) (the “Principal Amount,”) and together with any
note(s) issued in replacement thereof or as a dividend thereon or otherwise with
respect thereto in accordance with the terms thereof, in the form attached
hereto as Exhibit A (the “Note”), upon the terms and subject to the limitations
and conditions set forth in such Note;

 

C. The Note carries an original issue discount of Sixty-Four Thousand Two
Hundred Eighty-Five and 71/100 Dollars ($64,285.71.00) (the “OID”), to cover the
Purchaser’s legal fees, accounting fees, due diligence fees, monitoring, and/or
other transactional costs incurred in connection with the purchase and sale of
the Note, which is included in the principal balance of the Note. Thus, the
purchase price of this Note shall be $650,000.00, computed by subtracting the
OID from the Principal Amount.

 

D. 1847 wishes to issue to the Purchaser, as additional consideration for the
purchase of the Note, (i) a warrant in the form attached hereto as Exhibit B to
purchase 200,000 of the Company’s Common Shares at an exercise price of $1.25
per share (the “Warrant”), both as further provided herein; (ii) shares of
common stock equal to 7.5% non-dilutable interest of Holdco (“Equity Interest”);
and (iii) 50,000 of the Company’s Common Shares (the “Commitment Shares”).

 

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AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing, and the representations,
warranties, covenants and conditions set forth below, 1847 and the Purchaser,
intending to be legally bound, hereby agree as follows:

 

1.  AMOUNT AND TERMS OF THE NOTE

 

1.1 Purchase of the Note. Subject to the terms of this Agreement, for
consideration of Six Hundred Fifty Thousand Dollars ($650,000.00) in cash and in
immediately available funds (the “Consideration”), the Purchaser agrees to
subscribe for and purchase from 1847 on the Closing Date (as hereinafter
defined), and 1847 agrees to issue and sell to the Purchaser, (i) the Note, (ii)
the Warrant, (iii) the Equity Interest and (iv) the Commitment Shares.

 

1.2 Form of Payment. At the Closing (as hereinafter defined), the Purchaser
shall pay the Consideration.

 

2. CLOSING AND DELIVERY

 

2.1 Closing Date. Subject to the satisfaction (or written waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Note pursuant to this Agreement (the “Closing
Date”) shall be 4:00 PM, Eastern Time on the date first written above, or such
other mutually agreed upon time.

 

2.2 Closing. The closing of the transactions contemplated by this Agreement (the
“Closing”) shall occur on the Closing Date at such location as may be agreed to
by the parties (including via exchange of electronic signatures).

 

2.3 Delivery. At the Closing, or as promptly as commercially reasonable
thereafter, in addition to the delivery by the Purchaser of the Consideration
and the delivery by 1847 to the Purchaser of the Note, the Company shall issue
and deliver to the Purchaser the Warrant and the Commitment Shares and Holdco
shall issue and deliver to the Purchaser the Equity Interest.

 

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3. REPRESENTATIONS, WARRANTIES THE COMPANY

 

Except as set forth in the corresponding section of the Disclosure Schedule
delivered to the Purchaser concurrently herewith and attached hereto as Schedule
I (the “Disclosure Schedule”) or as disclosed in the Disclosure Materials (as
defined below), the 1847 hereby makes the following representations and
warranties as of the date hereof and as of the Closing Date to the Purchaser:

 

3.1 Organization, Good Standing and Qualification. Company and each of its
Subsidiaries (as defined below) is a corporation or limited liability company
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization. Each of Company and its
Subsidiaries has the requisite corporate power to own and operate its properties
and assets and to carry on its business as now conducted and as proposed to be
conducted. Company and each of its Subsidiaries is duly qualified and is
authorized to do business and is in good standing as a foreign corporation in
all jurisdictions in which the nature of its activities and of its properties
(both owned and leased) makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, would not
have or reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of any Subscription Document, (ii) a
material adverse effect on the results of operations, assets, business or
financial condition of Company and the Subsidiaries, taken as a whole, or (iii)
adversely impair the Company’s ability to perform in any material respect on a
timely basis its obligations under any Subscription Document (any of (i), (ii)
or (iii), a “Material Adverse Effect”).

 

3.2 Corporate Power. 1847 has all requisite corporate power to execute and
deliver this Agreement and enter into the security and pledge agreement of even
date herewith (the “Security and Pledge Agreement”) in the form of Exhibit C and
the other instruments, documents and agreements being entered into at the
Closing (each a “Subscription Document” and collectively, the “Subscription
Documents”) and to carry out and perform its respective obligations under the
terms of the Subscription Documents, including, to issue the Note, with respect
to Holdco, to issue the Equity Interest and with respect to the Company, to
issue the Warrants and the Commitment Shares.

 

3.3 Subsidiaries and Affiliates. Section 3.3 of the Disclosure Schedule sets
forth a true and correct description of all of Company’s Subsidiaries and
Affiliates and the capitalization (including options, warrants and other such
equity), pro forma as of the date hereof reflecting all pending acquisitions.
For purposes of this Agreement, the term “Subsidiary” means, with respect to
Company, any corporation or other entity of which at least a majority of the
outstanding shares of stock or other ownership interests having by the terms
thereof ordinary voting power to elect a majority of the board of directors (or
persons performing similar functions) of such corporation or entity (regardless
of whether or not at the time, in the case of a corporation, stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by Company or one or more of its Affiliates,
provided, however, that such term does not include any subsidiary formed by the
Company that is not and has not been active and operational, and the term
“Affiliate” means, as to any person (the “Subject Person”), any other person
that directly or indirectly through one or more intermediaries controls or is
controlled by, or is under direct or indirect common control with, the Subject
Person. For the purposes of this definition, “control” when used with respect to
any person means the power to direct the management and policies of such person,
directly or indirectly, whether through the ownership of voting securities,
through representation on such person’s board of directors or other management
committee or group, by contract or otherwise.

 

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3.4 Authorization. All corporate action on the part of each of the Company, 1847
Goedeker and Holdco, its respective directors and its respective stockholders
necessary for the authorization of the Subscription Documents to which it is a
party, and the execution, delivery and performance of all respective obligations
under the Subscription Documents, including the issuance and delivery of the
Note, the Equity Interest, the Commitment Shares, the Warrants and the
reservation of the equity securities issuable upon conversion of the Note and
the exercise of the Warrants (collectively, the “Underlying Securities”) has
been taken or will be taken prior to the issuance of such Underlying Securities.
The Subscription Documents, when executed and delivered by 1847 shall constitute
valid and binding obligations of 1847 enforceable in accordance with their
terms, subject to laws of general application relating to bankruptcy,
insolvency, the relief of debtors and, with respect to rights to indemnity,
subject to federal and state securities laws. The Underlying Securities, when
issued in compliance with the provisions of the Subscription Documents, will be,
validly issued, fully paid and non-assessable and free of any liens,
encumbrances, security interests or other adverse claim (a “Lien”) and issued in
compliance with all applicable federal and securities laws.

 

3.5 Governmental Consents. Neither Company nor any Subsidiary is required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other foreign, federal,
state, local or other governmental authority or other person in connection with
the execution, delivery and performance by each of the Company, 1847 Goedeker or
Holdco, of the Subscription Documents to which it is a party, other than (a)
applicable Blue Sky filings, (b) such as have already been obtained or such
exemptive filings as are required to be made under applicable securities laws,
(c) such other filings that have been made pursuant to applicable state
securities laws and post-sale filings pursuant to applicable state and federal
securities laws which the Company undertakes to file within the applicable time
periods. Subject to the accuracy of the representations and warranties of the
Purchaser set forth in Section 4 hereof, 1847 has taken all action necessary to
exempt: (i) the issuance and sale of the Note, the Warrant and the Commitment
Shares, (ii) the issuance of the Equity Interest, (iii) the issuance of the
Underlying Securities upon due conversion of the Note and due exercise of the
Warrant, and (iv) the other transactions contemplated by the Subscription
Documents from the provisions of any preemptive rights, stockholder rights plan
or other “poison pill” arrangement, any anti-takeover, business combination or
control share law or statute binding on the Company, 1847 Goedeker or Holdco, or
to which the Company, 1847 Goedeker or Holdco, or any of its respective assets
and properties may be subject and any provision of its respective Articles of
Incorporation or Certificate of Incorporation, as the case may be, or its
respective Bylaws, or other organizational documentation, as the case may be,
that is or could reasonably be expected to become applicable to the Purchaser as
a result of the transactions contemplated hereby, including without limitation,
the issuance of the Note, the Equity Interest, the Commitment Shares, the
Warrant, and the Underlying Securities (collectively, the “Securities”) and the
ownership, disposition or voting of the Securities by the Purchaser or the
exercise of any right granted to the Purchaser pursuant to this Agreement or the
other Subscription Documents.

 

3.6 Compliance with Laws. Neither Company nor any Subsidiary is in violation of
any applicable statute, rule, regulation, order or restriction of any domestic
or foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties, which violation
would materially and adversely affect the business, assets, liabilities,
financial condition or operations of Company and its Subsidiaries.

 

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3.7 Compliance with Other Instruments. Neither Company nor any of its
Subsidiaries is in violation or default of any term of its organizational
documents, or of any provision of any mortgage, indenture or contract to which
it is a party and by which it is bound or of any judgment, decree, order or
writ, other than such violations that would not individually or in the aggregate
have a Material Adverse Effect on the Company, 1847 Goedeker or Holdco. Except
as set forth in Section 3.7 of the Disclosure Schedule, the execution, delivery
and performance of the Subscription Documents, and the consummation of the
transactions contemplated by the Subscription Documents will not result in any
such violation or be in conflict with, or constitute, with or without the
passage of time and giving of notice, either a default under any such provision,
instrument, judgment, decree, order or writ or an event that results in the
creation of any Lien upon any assets of 1847 or the suspension, revocation,
impairment, forfeiture, or nonrenewal of any material permit, license,
authorization or approval applicable to the Company or any of its Subsidiaries,
its business or operations or any of its assets or properties. The sale of the
Note, the issuance of the Commitment Shares and the Warrant and the subsequent
issuance of the Underlying Securities are not and will not be subject to any
preemptive rights or rights of first refusal that have not been properly waived
or complied with.

 

3.8 Offering. Assuming the accuracy of the representations and warranties of the
Purchaser contained in Section 4 hereof, the offer, issue, and sale of
Securities are and will be exempt from the registration and prospectus delivery
requirements of the Securities Act, and have been registered or qualified (or
are exempt from registration and qualification) under the registration, permit,
or qualification requirements of all applicable state securities laws. No “bad
actor” disqualifying event described in Rule 506(d)(1)(i)-(viii) of the
Securities Act (a “Disqualification Event”) is applicable to 1847 or, to 1847’s
knowledge, any person listed in the first paragraph of Rule 506(d)(1) of the
Securities Act, except for a Disqualification Event as to which Rule
506(d)(2)(ii–iv) or (d)(3), is applicable.

 

3.9 Capitalization. Company has authorized 500,000,000 Common Shares and 1,000
allocation shares. Holdco has authorized 5,000 shares of Common Stock. All
outstanding shares of capital stock are duly authorized, validly issued, fully
paid and non-assessable and have been issued in compliance with all applicable
securities laws. Except for the Equity Interests, the Warrant, the Commitment
Shares and the Underlying Securities or as otherwise listed in Section 3.9 of
the Disclosure Schedule, there are no outstanding options, warrants, script
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any person any right to subscribe for
or acquire, any shares of common stock, or contracts, commitments,
understandings or arrangements by which Company or any Subsidiary is or may
become bound to issue additional shares of common stock, or securities or rights
convertible or exchangeable into shares of common stock. There are no price
based anti-dilution or price adjustment provisions contained in any security
issued by Company or Holdco (or in any agreement providing rights to security
holders) and the issue and sale of the Securities will not obligate Company or
Holdco to issue shares of Common Shares or Common Stock, respectively, or other
securities to any person (other than the Purchaser) and will not result in a
right of any holder of 1847’s securities to adjust the exercise, conversion,
exchange or reset price under such securities. Except as set forth in Section
3.9 of the Disclosure Schedule, Company owns, directly or indirectly, all of the
capital stock of each Subsidiary free and clear of any Liens, and all the issued
and outstanding shares of capital stock of each Subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and similar rights.

 

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3.10 SEC Reports; Financial Statements. Except as set forth in Section 3.10 of
the Disclosure Schedule, the Company has filed all reports and registration
statements required to be filed by it under the Securities Act and the Exchange
Act of 1934, as amended (the “Exchange Act”), including pursuant to Section
13(a) or 15(d) of the Exchange Act, for the two years preceding the date hereof
(or such shorter period as the Company was required by law to file such
material) (the foregoing materials, including the exhibits thereto, being
collectively referred to herein as the “SEC Reports” and, together with the
Disclosure Schedule to this Agreement, the “Disclosure Materials”). As of their
respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Except as indicated in Section 3.10 of the
Disclosure Schedule, the financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as in
effect at the time of filing. Such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be otherwise specified
in such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments.

 

3.11 Material Changes. Since the date of the latest audited financial
statements, (i) there has been no event, occurrence or development that,
individually or in the aggregate, has had or that could result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP or required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting or the identity of its
auditors, (iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock, and (v) the
Company has not issued any equity securities to any officer, director or
affiliate, except pursuant to existing Company stock-based plans or agreements.

 

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3.12 Litigation. Except as set forth in Section 3.12 of the Disclosure Schedule
, there is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) (collectively,
an “Action”) which: (i) adversely affects or challenges the legality, validity
or enforceability of any of the Subscription Documents or the Securities or (ii)
could, if there were an unfavorable decision, have or reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor
any director or officer thereof, is or has been the subject of any Action
involving a claim of violation of or liability under federal or state securities
laws or a claim of breach of fiduciary duty. There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by governmental authority involving the Company or any Subsidiary
or any of its respective current or former directors or officers.

 

3.13 Labor Relations. Neither Company nor any Subsidiary is a party to or bound
by any collective bargaining agreements or other agreements with labor
organizations. Neither Company nor any Subsidiary has violated in any material
respect any laws, regulations, orders or contract terms, affecting the
collective bargaining rights of employees, labor organizations or any laws,
regulations or orders affecting employment discrimination, equal opportunity
employment, or employees’ health, safety, welfare, wages and hours. No material
labor dispute exists or, to the knowledge of the Company, is imminent with
respect to any of the employees of the Company which could reasonably be
expected to result in a Material Adverse Effect.

 

3.14 Regulatory Permits. Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct their respective businesses,
except where the failure to possess such permits would not have or reasonably be
expected to result in a Material Adverse Effect (“Material Permits”), and
neither Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.

 

3.15 Title to Assets. Except as set forth in Section 3.15 of the Disclosure
Schedule, Company and the Subsidiaries have good and marketable title in fee
simple to all real property owned by them that is material to the business of
Company and the Subsidiaries and good and marketable title in all personal
property owned by them that is material to the business of Company and the
Subsidiaries, in each case free and clear of all Liens, except for Liens as do
not materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by Company and the
Subsidiaries and Liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties. Any real
property and facilities held under lease by Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases of which Company and
the Subsidiaries are in compliance.

 

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3.16 Taxes.

 

(a) Except as otherwise itemized in Section 3.16 of the Disclosure Schedule,
Company and its Subsidiaries have timely and properly filed all tax returns
required to be filed by them for all years and periods (and portions thereof)
for which any such tax returns were due, except where the failure to so file
would not have a Material Adverse Effect; all such filed tax returns are
accurate in all material respects; the Company has timely paid all taxes due and
payable (whether or not shown on filed tax returns), except where the failure to
so pay would not have exceeded $10,000 in the aggregate or have a Material
Adverse Effect; there are no pending assessments, asserted deficiencies or
claims for additional taxes that have not been paid; the reserves for taxes, if
any, reflected in the financial statements are adequate, and there are no Liens
for taxes on any property or assets of the Company and any of its Subsidiaries
(other than Liens for taxes not yet due and payable); there have been no audits
or examinations of any tax returns by any (a) nation, state, commonwealth,
province, territory, county, municipality, district or other jurisdiction of any
nature; (b) federal, state, local, municipal, foreign or other government; or
(c) governmental or quasi-governmental authority of any nature (including any
governmental or administrative division, department, agency, commission,
instrumentality, official, organization, unit, body or entity) and any court or
other tribunal (a “Governmental Body”), and the Company or its Subsidiaries have
not received any notice that such audit or examination is pending or
contemplated; no claim has been made by any Governmental Body in a jurisdiction
where the Company or any of its Subsidiaries does not file tax returns that it
is or may be subject to taxation by that jurisdiction; to the knowledge of the
Company, no state of facts exists or has existed which would constitute grounds
for the assessment of any penalty or any further tax liability beyond that shown
on the respective tax returns; and there are no outstanding agreements or
waivers extending the statutory period of limitation for the assessment or
collection of any tax.

 

(b) Neither the Company nor any of its Subsidiaries is a party to any
tax-sharing agreement or similar arrangement with any other Person.

 

(c) The Company has made all necessary disclosures required by Treasury
Regulation Section 1.6011-4. The Company has not been a participant in a
“reportable transaction” within the meaning of Treasury Regulation Section
1.6011-4(b).

 

(d) No payment or benefit paid or provided, or to be paid or provided, to
current or former employees, directors or other service providers of the
Company, 1847 Goedeker or Holdco will fail to be deductible for federal income
tax purposes under Section 280G of the Internal Revenue Code of 1986, as amended
(the “Code”).

 

3.17 Patents and Trademarks. Company and the Subsidiaries have, or have rights
to use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and other similar rights that
are necessary or material for use in connection with their respective businesses
and which the failure to so have could have or reasonably be expected to result
in a Material Adverse Effect (collectively, the “Intellectual Property Rights”).
Neither Company nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by Company or any Subsidiary violates or
infringes upon the rights of any Person. All such Intellectual Property Rights
are enforceable. Company and its Subsidiaries have taken reasonable steps to
protect Company’s and its Subsidiaries’ rights in their Intellectual Property
Rights and confidential information (the “Confidential Information”). Each
employee, consultant and contractor who has had access to Confidential
Information which is necessary for the conduct of Company’s and each of its
Subsidiaries’ respective businesses as currently conducted or as currently
proposed to be conducted has executed an agreement to maintain the
confidentiality of such Confidential Information and has executed appropriate
agreements that are substantially consistent with the Company’s standard forms
thereof. Except under confidentiality obligations, there has been no material
disclosure of any of Company’s or its Subsidiaries’ Confidential Information to
any third party.

 

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3.18 Environmental Matters. Neither Company nor any Subsidiary is in violation
of any statute, rule, regulation, decision or order of any Governmental Body
relating to the use, disposal or release of hazardous or toxic substances or
relating to the protection or restoration of the environment or human exposure
to hazardous or toxic substances (collectively, “Environmental Laws”), owns or
operates any real property contaminated with any substance that is subject to
any Environmental Laws, is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, or is subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim has had
or could reasonably be expected to have a Material Adverse Effect, individually
or in the aggregate; and there is no pending or, to the Company’s knowledge,
threatened investigation that might lead to such a claim.

 

3.19 Insurance. Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which Company and the
Subsidiaries are engaged. Neither Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business without a significant increase in
cost.

 

3.20 Transactions with Affiliates and Employees. Except as disclosed in the
Company’s audited financial statements or the Disclosure Materials, none of the
officers or directors of the Company and, to the knowledge of the Company, none
of the employees of the Company is presently a party to any transaction with
Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $10,000
other than (a) for payment of salary or consulting fees for services rendered,
(b) reimbursement for expenses incurred on behalf of the Company and (c) for
other employee benefits, including stock option agreements under any stock
option plan of Company.

 

3.21 Brokers and Finders. No person, with the exception of Craft Capital, will
have, as a result of the transactions contemplated by the Subscription
Documents, any valid right, interest or claim against or upon Company, any
Subsidiary or the Purchaser for any commission, fee or other compensation
pursuant to any agreement, arrangement or understanding entered into by or on
behalf of the Company.

 

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3.22 Questionable Payments. Neither Company nor any of its Subsidiaries nor, to
the Company’s knowledge, any of their respective current or former stockholders,
directors, officers, employees, agents or other persons acting on behalf of
Company or any Subsidiary, has on behalf of Company or any Subsidiary or in
connection with their respective businesses: (a) used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity; (b) made any direct or indirect unlawful payments to any
governmental officials or employees from corporate funds; (c) established or
maintained any unlawful or unrecorded fund of corporate monies or other assets;
(d) made any false or fictitious entries on the books and records of Company or
any Subsidiary; or (e) made any unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment of any nature.

 

3.23 Solvency. None of the Company, 1847 Goedeker or Holdco has (a) made a
general assignment for the benefit of creditors; (b) filed any voluntary
petition in bankruptcy or suffered the filing of any involuntary petition by its
creditors; (c) suffered the appointment of a receiver to take possession of all,
or substantially all, of its assets; (d) suffered the attachment or other
judicial seizure of all, or substantially all, of its assets; (e) admitted in
writing its inability to pay its debts as they come due; or (f) made an offer of
settlement, extension or composition to its creditors generally.

 

3.24 Foreign Corrupt Practices Act. None of Company or any of its Subsidiaries,
nor to the knowledge of the Company, any agent or other person acting on behalf
of the Company or any of its Subsidiaries, has, directly or indirectly: (a) used
any funds, or will use any proceeds from the sale of the Securities, for
unlawful contributions, gifts, entertainment or other unlawful expenses related
to foreign or domestic political activity, (b) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (c) failed to
disclose fully any contribution made by Company or any of its Subsidiaries (or
made by any person acting on their behalf of which the Company is aware) or any
members of their respective management which is in violation of any legal
requirement, or (d) has violated in any material respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations
thereunder which was applicable to Company or any of its Subsidiaries.

 

3.25 Disclosures. Neither the Company, 1847 Goedeker, Holdco nor any person
acting on their behalf has provided the Purchaser or its agents or counsel with
any information that constitutes or might constitute material, non-public
information, other than the terms of the transactions contemplated hereby. The
written materials delivered to the Purchaser in connection with the transactions
contemplated by the Subscription Documents do not contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading.

 

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3.26 Transfer Agent. Company represents and warrants that it will not replace
its transfer agents without Purchaser’s permission so long as the Note is
outstanding. Company acknowledges that this is extremely material to the Note
and the investment is made on the basis of the assumption that this will not
happen.

 

4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

 

4.1 Purchase for Own Account. The Purchaser represents that it is acquiring the
Note solely for its own account and beneficial interest for investment and not
for sale or with a view to distribution of the Note or any part thereof, has no
present intention of selling (in connection with a distribution or otherwise),
granting any participation in, or otherwise distributing the same, and does not
presently have reason to anticipate a change in such intention.

 

4.2 Information and Sophistication. Without lessening or obviating the
representations and warranties of 1847 set forth in Section 3, the Purchaser
hereby: (a) acknowledges that it has received all the information it has
requested from 1847 and it considers necessary or appropriate for deciding
whether to acquire the Note, (b) represents that it has had an opportunity to
ask questions and receive answers from 1847 regarding the terms and conditions
of the offering of the Note and to obtain any additional information necessary
to verify the accuracy of the information given the Purchaser and (c) further
represents that it has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risk of this investment.

 

4.3 Ability to Bear Economic Risk. The Purchaser acknowledges that investment in
the Note involves a high degree of risk, and represents that it is able, without
materially impairing its financial condition, to hold the Note for an indefinite
period of time and to suffer a complete loss of its investment.

 

4.4 Accredited Investor Status. The Purchaser is an “accredited investor” as
such term is defined in Rule 501 under the Act.

 

4.5 Existence; Authorization. The Purchaser is a limited liability company duly
organized, validly existing and in good standing under the laws of the state of
its organization, having full power and authority to own its properties and to
carry on its business as conducted. The principal place of business of the
Purchaser is as shown on the Accredited Investor Questionnaire. The Purchaser
has the requisite power and authority to deliver this Agreement, perform its
obligations set forth herein, and consummate the transactions contemplated
hereby. The Purchaser has duly executed and delivered this Agreement and has
obtained the necessary authorization to execute and deliver this Agreement and
to perform his, her or its obligations herein and to consummate the transactions
contemplated hereby. This Agreement, assuming the due execution and delivery
hereof by the Company, 1847 Goedeker and Holdco, is a legal, valid and binding
obligation of the Purchaser enforceable against the Purchaser in accordance with
its terms.

 

4.6 No Regulatory Approval. The Purchaser understands that no state or federal
authority has scrutinized this Agreement or the Note offered pursuant hereto,
has made any finding or determination relating to the fairness for investment in
the Note, or has recommended or endorsed the Note, and that the Note has not
been registered or qualified under the Act or any state securities laws, in
reliance upon exemptions from registration thereunder. The Note may not, in
whole or in part, be resold, transferred, assigned or otherwise disposed of
unless it is registered under the Act or an exemption from registration is
available, and unless the proposed disposition is in compliance with the
restrictions on transferability under federal and state securities laws.

 

4.7 Purchaser Received Independent Advice. The Purchaser confirms that the
Purchaser has been advised to consult with the Purchaser’s independent attorney
regarding legal matters concerning the Company and its Subsidiaries and to
consult with independent tax advisers regarding the tax consequences of
investing in the Company and its Subsidiaries. The Purchaser acknowledges that
Purchaser understands that any anticipated United States federal or state income
tax benefits may not be available and, further, may be adversely affected
through adoption of new laws or regulations or amendments to existing laws or
regulations. The Purchaser acknowledges and agrees that 1847 is providing no
warranty or assurance regarding the ultimate availability of any tax benefits to
the Purchaser by reason of the subscription.

 

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4.8 Legends. The Purchaser understands that until such time as the Note, the
Warrant, and, upon the conversion of the Note and the exercise of the Warrant in
accordance with its respective terms, the Underlying Securities, and the
Commitment Shares have been registered under the Securities Act or may be sold
pursuant to Rule 144, Rule 144A under the Securities Act or Regulation S without
any restriction as to the number of securities as of a particular date that can
then be immediately sold, the Securities may bear a restrictive legend in
substantially the following form (and a stop- transfer order may be placed
against transfer of the certificates for such Securities):

 

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE, NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE OR
EXERCISABLE (IF APPLICABLE), HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED
BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A OR
REGULATION S UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

 

5. FURTHER AGREEMENTS; POST-CLOSING COVENANTS

 

5.1 Warrant. As consideration for entering into this Agreement, Company shall
issue to the Purchaser a warrant for 200,000 shares of the authorized shares of
the Company’s Common Shares (the “Warrant”). The Warrant shall have a term of
sixty (60) months, be exercisable at a price equal to the $1.25 per share and
shall contain full-ratchet anti-dilution protection provisions.

 

5.2 Use of Proceeds. Company shall use the proceeds of sale and issuance of the
Note solely to fund the expenses of the purchase of the assets of Goedeker
Television Co., Inc. (“GI”).

 

5.3 Equity Interest. Holdco shall issue the Equity Interest to Purchaser.

 

5.4 Form D; Blue Sky Laws. 1847 agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to the
Purchaser promptly after such filing. Company shall take such action as Company
shall reasonably determine is necessary to qualify the Securities for sale to
the Purchaser at the applicable closing pursuant to this Agreement under
applicable securities or “blue sky” laws of the states of the United States (or
to obtain an exemption from such qualification), and shall provide evidence of
any such action so taken to the Purchaser on or prior to the initial closing.

 

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5.5 Most Favored Nations. If, after the Issue Date, Company or any Subsidiary
issues any other security with any term reasonably believed by the Purchaser to
be more favorable to the holder of such security or with a term in favor of the
holder of such security that was not similarly provided to the Purchaser in the
Note (“Other Securities”), the Company shall notify the Purchaser in writing of
such additional or more favorable term. At the Purchaser’s option, such more
favorable term or condition shall become a part of the Subscription Documents
with the Purchaser. The Company will provide such notice to the Purchaser within
three (3) business days following the issuance of such Other Securities. In the
event the Purchaser determines that the terms of the Other Securities are
preferable to the terms of the Note, the Purchaser will notify the Company in
writing within five 5 days following Purchaser’s receipt of such notice from the
Company. Within three (3) business days after receipt of such written notice
from the Purchaser, but in any event within 10 days, the Company will amend and
restate the Subscription Documents to include the more favorable term or
condition and thereby grant to the Purchaser such preferential rights of the
holders of such Other Securities. The types of terms contained in Other
Securities that may be more favorable to the holder of such security include,
but are not limited to, terms addressing conversion discounts, prepayment rate,
conversion lookback periods, interest rates, original issue discounts, stock
sale price, private placement price per share, and warrant coverage.

 

5.6 Restrictions on Activities. Commencing as of the date first above written,
and so long as 1847 has an obligation under the Note, the Company shall not,
directly or indirectly, without the Purchaser’s prior written consent, which
consent shall not be unreasonably withheld: (a) change the nature of its
business; (b) sell, divest, acquire, change the structure of any material assets
other than in the ordinary course of business; or (c) solicit any offers for,
respond to any unsolicited offers for, or conduct any negotiations with any
other person or entity in respect of any variable rate debt transactions (i.e.,
transactions were the conversion or exercise price of the security issued by the
Company varies based on the market price of the Common Shares) or merchant cash
advance transactions action in which it sells future receivables at a discount
or a substantially similar transaction., whether a transaction similar to the
one contemplated hereby or any other investment.

 

5.7 Sale of Assets; Issuance of Equity or Debt. Should 1847 sell any material
assets, or issue and equity or debt, including the sale of any Subsidiary, 1847
shall use the net proceeds of any such sale to repay the Note.

 

5.8 Usury. To the extent it may lawfully do so, 1847 hereby agrees not to insist
upon or plead or in any manner whatsoever claim, and will resist any and all
efforts to be compelled to take the benefit or advantage of, usury laws wherever
enacted, now or at any time hereafter in force, in connection with any action or
proceeding that may be brought by the Purchaser in order to enforce any right or
remedy under the Note. Notwithstanding any provision to the contrary contained
in the Note, it is expressly agreed and provided that the total liability of
1847 under the Note for payments which under New York law are in the nature of
interest shall not exceed the maximum lawful rate authorized under applicable
law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall
any rate of interest or default interest, or both of them, when aggregated with
any other sums which under New York law in the nature of interest that 1847 may
be obligated to pay under the Note exceed such Maximum Rate. It is agreed that
if the maximum contract rate of interest allowed by New York law and applicable
to the Note is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Note from the
effective date thereof forward, unless such application is precluded by
applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum Rate is paid by 1847 to the Purchaser with respect to indebtedness
evidenced by the Note, such excess shall be applied by the Purchaser to the
unpaid principal balance of any such indebtedness or be refunded to 1847, the
manner of handling such excess to be at the Purchaser’s election.

 

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5.9 Registration Rights.

 

(a) Piggy-Back Registration. Company shall give the Purchaser at least 30 days’
prior written notice of each filing by Company of a registration statement
(other than a registration statement on Form S-4 or Form S-8 or on any successor
forms thereto) with the SEC. If requested by the Purchaser in writing within 20
days after receipt of any such notice, Company shall, at Company’s sole expense
(other than the underwriting discounts, if any, payable in respect of the shares
sold by the Purchaser), register all or, at Purchaser’s option, any portion of
the Commitment Shares and Underlying Securities (collectively, the “Registrable
Securities”) concurrently with the registration of such other securities, all to
the extent requisite to permit the public offering and sale of the Registrable
Securities through the securities exchange, if any, on which the Common Shares
is being sold or on the over-the-counter market, and will use its reasonable
best efforts through its officers, directors, auditors, and counsel to cause
such registration statement to become effective as promptly as practicable. If
the managing underwriter of any such offering shall determine and advise Company
that, in its opinion, the distribution of all or a portion of the Registrable
Securities requested to be included in the registration concurrently with the
securities being registered by Company would materially adversely affect the
distribution of such securities by Company then Company will include in such
registration first, the securities that Company proposes to sell and second, the
Registrable Securities requested to be included in such registration, to the
extent permitted by the managing underwriter.

 

(b) In the event of a registration pursuant to these provisions, Company shall
use its reasonable best efforts to cause the Registrable Securities so
registered to be registered or qualified for sale under the securities or blue
sky laws of such jurisdictions as the Purchaser may reasonably request;
provided, however, that Company shall not be required to qualify to do business
in any state by reason of this section in which it is not otherwise required to
qualify to do business.

 

(c) Company shall keep effective any registration or qualification contemplated
by this section and shall from time to time amend or supplement each applicable
registration statement, preliminary prospectus, final prospectus, application,
document and communication for such period of time as shall be required to
permit the Purchaser to complete the offer and sale of the Registrable
Securities covered thereby.

 

(d) In the event of a registration pursuant to the provisions of this section,
Company shall furnish to the Purchaser such reasonable number of copies of the
registration statement and of each amendment and supplement thereto (in each
case, including all exhibits), of each prospectus contained in such registration
statement and each supplement or amendment thereto (including each preliminary
prospectus), all of which shall conform to the requirements of the Act and the
rules and regulations thereunder, and such other documents, as the Purchaser may
reasonably request to facilitate the disposition of the Registrable Securities
included in such registration.

 

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(e) Company shall notify the Purchaser within three (3) business days after such
registration statement has become effective or a supplement to any prospectus
forming a part of such registration statement has been filed.

 

(f) Company shall advise the Purchaser within three (3) business days after it
shall receive notice or obtain knowledge of the issuance of any stop order by
the Commission suspending the effectiveness of such registration statement, or
the initiation or threatening of any proceeding for that purpose and within
three (3) business days take action using its reasonable best efforts to prevent
the issuance of any stop order or to obtain its withdrawal if such stop order
should be issued.

 

(g) Company shall within three (3) business days notify the Purchaser at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, would include an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances then existing, and at the reasonable request
of the Purchaser prepare and furnish to it such number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities or securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made. The Purchaser shall suspend all sales of the Registrable
Securities upon receipt of such notice from Company and shall not re-commence
sales until they receive copies of any necessary amendment or supplement to such
prospectus, which shall be delivered to the Purchaser within 30 days of the date
of such notice from Company.

 

(h) If requested by the underwriter for any underwritten offering of Registrable
Securities, Company and the Purchaser will enter into an underwriting agreement
with such underwriter for such offering, which shall be reasonably satisfactory
in substance and form to Company, Company’s counsel and the Purchaser’ counsel,
and the underwriter, and such agreement shall contain such representations and
warranties by Company and the Purchaser and such other terms and provisions as
are customarily contained in an underwriting agreement with respect to secondary
distributions solely by selling stockholders, including, without limitation,
indemnities substantially to the effect and to the extent provided below.

 

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(i) The rights of the Purchaser under this Section 5.9 shall apply equally to
the filing by Company of an offering statement on Form 1-A under Regulation A
promulgated under the Act and, if Company files such an offering statement
instead of a registration statement, all references to (A) registration
statement shall be deemed to be references to offering statement, (B) prospectus
shall be deemed to be references to offering circular, and (C) effective date of
a registration statement shall be deemed to be references to qualification date
of an offering statement. The Purchaser’s rights under this Section 5.9 shall
automatically terminate once the Purchaser has sold all of the Registrable
Securities or all of the Registrable Securities may be resold by the Purchaser
under Rule 144 of the Act without limitation as to the volume of Registrable
Securities to be sold.

 

5.10 Legal Counsel Opinions.

 

(a) Upon the request of the Purchaser from to time to time, Company shall be
responsible (at its cost) for promptly supplying to Company’s transfer agent and
the Purchaser a customary legal opinion letter of its counsel (the “Legal
Counsel Opinion”) to the effect that the resale of the Registrable Securities by
the Purchaser or its affiliates, successors and assigns is exempt from the
registration requirements of the 1933 Act pursuant to Rule 144 (provided the
requirements of Rule 144 are satisfied and provided the Registrable Securities
are not then registered under the 1933 Act for resale pursuant to an effective
registration statement). Should Company’s legal counsel fail for any reason to
issue the Legal Counsel Opinion, the Purchaser may (at Company’s cost) secure
another legal counsel to issue the Legal Counsel Opinion, and Company will
instruct its transfer agent to accept such opinion. Company shall not impede the
removal by its stock transfer agent of the restricted legend from any Common
Shares certificate upon receipt by the transfer agent of a Rule 144 Opinion
Letter. Company HEREBY AGREES THAT IT MAY NEVER TAKE THE POSITION THAT IT IS A
“SHELL COMPANY” IN CONNECTION WITH ITS OBLIGATIONS UNDER THIS AGREEMENT OR
OTHERWISE.

 

5.11 Listing. Company will, so long as the Purchaser owns any of the Securities,
maintain the listing and trading of its Common Shares on the OTC Pink or any
equivalent exchange or electronic quotation system and will comply in all
respects with Company’s reporting, filing and other obligations under the bylaws
or rules of the Financial Industry Regulatory Authority, or FINRA, and such
exchanges, as applicable, as well as with the SEC. Company shall promptly
provide to the Purchaser copies of any notices it receives from the OTCQB and
any other exchanges or electronic quotation systems on which the Common Shares
is then traded regarding the continued eligibility of the Common Shares for
listing on such exchanges and quotation systems.

 

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5.12 Information and Observer Rights

 

(a) As long as the Purchaser owns at least five percent (5%) of the Securities
originally purchased hereunder, Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by Company pursuant to the Exchange Act. As long as
the Purchaser at least five percent (5%) of the Securities originally purchased
hereunder, if Company is not required to file reports pursuant to such laws, it
will prepare and furnish to the Purchaser and simultaneously make publicly
available in accordance with Rule 144(c) such information as is required for the
Purchaser to sell the Securities under Rule 144. Company further covenants that
it will take such further action as any holder of Securities may reasonably
request, all to the extent required from time to time to enable the Purchaser to
sell the Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144. If Company fails to remain
current in its reporting obligations or to provide currently publicly available
information in accordance with Rule 144(c) and such failure extends for a period
of more than fifteen Trading Days (the date which such five Trading Day-period
is exceeded, being referred to as “Event Date”), then in addition to any other
rights the Purchaser may have hereunder or under applicable law, on each such
Event Date and on each monthly anniversary of each such Event Date (if the
applicable Event shall not have been cured by such date) until the information
failure is cured, Company shall pay to the Purchaser an amount in cash, as
partial liquidated damages and not as a penalty, equal to three-quarters of one
percent (0.75%) of purchase price paid for the Securities held by the Purchaser
at the Event Date with a maximum amount of liquidated damages payable hereunder
being capped at One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00). The
partial liquidated damages pursuant to the terms hereof shall apply on a daily
pro-rata basis for any portion of a month prior to the cure of an information
failure (except in the case of the first Event Date).

 

(b) As long as the Purchaser owns any Securities, if the Purchaser notifies
Company that it wishes to attend meetings of Company’s Board of Directors,
Company shall invite a designated representative of the Purchaser to attend all
meetings of Company’s Board of Directors in a nonvoting observer capacity and,
in this respect, and subject to the Purchaser’s having informed Company that it
wishes to attend, Company shall give such representative copies of all notices,
minutes, consents, and other materials that it provides to its directors at the
same time and in the same manner as provided to such directors; provided,
however, that such representative shall agree to hold in confidence and trust
and to act in a fiduciary manner with respect to all information so provided;
and provided further, that Company reserves the right to withhold any
information and to exclude such representative from any meeting or portion
thereof if access to such information or attendance at such meeting could
adversely affect the attorney-client privilege between Company and its counsel
or result in disclosure of trade secrets or a conflict of interest.

 

5.13 Confidentiality. The Purchaser agrees that the it will keep confidential
and will not disclose, divulge, or use for any purpose (other than to monitor
its investment in the Company) the terms and conditions of this Agreement or any
confidential information obtained from the Company pursuant to the terms of this
Agreement (including notice of Company’s intention to file a registration
statement), unless such confidential information (a) is known or becomes known
to the public in general (other than as a result of a breach of this Section
5.13 by the Purchaser), (b) is or has been independently developed or conceived
by the Purchaser without use of the Company’s confidential information, or (c)
is or has been made known or disclosed to the Purchaser by a third party without
a breach of any obligation of confidentiality such third party may have to the
Company; provided, however, that the Purchaser may disclose confidential
information (i) to its attorneys, accountants, consultants, and other
professionals to the extent necessary to obtain their services in connection
with monitoring its investment in the Company; (ii) to any prospective purchaser
of any Registrable Securities from the Purchaser, if such prospective purchaser
agrees to be bound by the provisions of this Section 5.13; (iii) to any existing
or prospective affiliate, partner, member, stockholder, or wholly owned
subsidiary of the Purchaser in the ordinary course of business, provided that
the Purchaser informs such person that such information is confidential and
directs such person to maintain the confidentiality of such information; or (iv)
as may otherwise be required by law, provided that the Purchaser notifies the
Company within three (3) business days of such disclosure and takes reasonable
steps to minimize the extent of any such required disclosure.

 

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5.14 Restrictions. Unless approved by the Purchaser, Company and each Subsidiary
shall not enter into an agreement to effect any sale of securities involving, or
convert any securities previously issued under, a Variable Rate Transaction or a
merchant cash advance transaction in which it sells future receivables at a
discount, or a substantially similar transaction. The term “Variable Rate
Transaction” means a transaction in which Company or any Subsidiary (i) issues
or sells any convertible securities either (A) at a conversion, exercise or
exchange rate or other price that is based upon and/or varies with the trading
prices of, or quotations for, the shares of Common Shares at any time after the
initial issuance of such convertible securities, or (B) with a conversion,
exercise or exchange price that is subject to being reset at some future date
after the initial issuance of such convertible securities or upon the occurrence
of specified or contingent events directly or indirectly related to the business
of Company or the Subsidiary, as the case may be, or the market for the Common
Shares, other than pursuant to a customary “weighted average” anti-dilution
provisions, or (ii) enters into any agreement (including, without limitation, an
“equity line of credit” or an “at-the-market offering”) whereby Company or any
Subsidiary may sell securities at a future determined price (other than standard
and customary “preemptive” or “participation” rights). The Purchaser shall be
entitled to obtain injunctive relief against Company and its Subsidiaries to
preclude any such issuance, which remedy shall be in addition to any right to
collect damages.

 

5.15 Participation Rights. In the event Company proposes to offer and sell its
securities in an Equity Financing (defined below), the Purchaser shall have the
right, but not the obligation, to participate in the purchase of the securities
being offered in such Equity Financing up to an amount equal to the Principal
Amount until the earliest of (i) the Maturity Date (as defined in the Note),
(ii) the date that the Note and all accrued but unpaid interest shall have been
repaid in full, and (iii) the closing date of an Equity Financing in which all,
or any remaining portion, of the outstanding principal amount of the Note along
with accrued but unpaid interest thereon shall have been converted, in full,
into, and on the same terms as, the securities being offered in such Equity
Financing (the “Participation Right”). For the avoidance of doubt, an “Equity
Financing” shall mean Company’s sale of its Common Shares or any securities
conferring the right to purchase Company’s Common Shares or securities
convertible into, or exchangeable for (with or without additional
consideration), Company’s Common Shares or the offer or sale of any debt. In
connection with each Participation Right, Company shall provide written notice
to the Purchaser of the terms and conditions of the Equity Financing at least
ten business days prior to the anticipated first closing of such Equity
Financing (the “EF Notice”). If the Purchaser shall elect to exercise its
Participation Right, it shall notify Company, in writing, of such election at
least two business days prior to the anticipated closing date set forth in the
EF Notice (the “Participation Notice”). In the event the Purchaser does not
return a Participation Notice to Company within such two-business day period,
the Participation Right granted hereunder shall terminate and be of no further
force and effect; provided, however, that such Participation Right shall be
reinstated if the anticipated closing referenced in the EF Notice does not occur
prior to ten business days following the anticipated first closing date
specified in such EF notice.

 

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5.16 Breach of Covenants. The Company acknowledges and agrees that if the
Company breaches any covenants set forth in this Section 5 and such breach
continues for a period of ten (10) days, in addition to any other remedies
available to the Purchaser pursuant to this Agreement, it will be considered an
Event of Default under Section 4.3 of the Note.

 

5.17 Transfer Agent Instructions. Company shall issue irrevocable instructions
to Company’s transfer agent to issue certificates, registered in the name of the
Purchaser or its nominee, upon issuance of the Equity Interest or exercise of
the Warrant, in such amounts as specified from time to time by the Purchaser to
Company in accordance with the terms thereof (the “Irrevocable Transfer Agent
Instructions”). In the event that Company proposes to replace its transfer
agent, Company shall provide, prior to the effective date of such replacement, a
fully executed Irrevocable Transfer Agent Instructions in a form as initially
delivered pursuant to this Agreement (including but not limited to the provision
to irrevocably reserved shares of Common Shares in the Reserved Amount (as
defined in the Note)) signed by the successor transfer agent to Company and
Company. Prior to registration of the Registrable Securities under the
Securities Act or the date on which the Registrable Securities may be sold
pursuant to Rule 144 without any restriction as to the number of Securities as
of a particular date that can then be immediately sold, all such certificates
shall bear the restrictive legend specified in Section 4.8 of this Agreement.
Company warrants that: (i) no instruction other than the Irrevocable Transfer
Agent Instructions referred to in this Section 5.17 will be given by Company to
its transfer agent and that the Securities shall otherwise be freely
transferable on the books and records of Company as and to the extent provided
in this Agreement and the Note; (ii) it will not direct its transfer agent not
to transfer or delay, impair, and/or hinder its transfer agent in transferring
(or issuing)(electronically or in certificated form) any certificate for
Securities to be issued to the Purchaser upon conversion of or otherwise
pursuant to the Note as and when required by the Note and this Agreement; (iii)
it will not fail to remove (or directs its transfer agent not to remove or
impairs, delays, and/or hinders its transfer agent from removing) any
restrictive legend (or to withdraw any stop transfer instructions in respect
thereof) on any certificate for any Securities issued to the Purchaser upon
conversion of or otherwise pursuant to the Note as and when required by the Note
and this Agreement and (iv) it will provide any required corporate resolutions
and issuance approvals to its transfer agent within 6 hours of each conversion
of the Note. Nothing in this Section shall affect in any way the Purchaser’s
obligations and agreement set forth in Section 4.9 hereof to comply with all
applicable prospectus delivery requirements, if any, upon re-sale of the
Securities. If the Purchaser provides Company, at the cost of Company, with (i)
an opinion of counsel in form, substance and scope customary for opinions in
comparable transactions, to the effect that a public sale or transfer of such
Securities may be made without registration under the 1933 Act and such sale or
transfer is effected or (ii) the Purchaser provides reasonable assurances that
the Securities can be sold pursuant to Rule 144, Company shall permit the
transfer, and, in the case of the Securities, promptly instruct its transfer
agent to issue one or more certificates, free from restrictive legend, in such
name and in such denominations as specified by the Purchaser. Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Purchaser, by vitiating the intent and purpose of the
transactions contemplated hereby. Accordingly, Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5.17 may be
inadequate and agrees, in the event of a breach or threatened breach by Company
of the provisions of this Section, that the Purchaser shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach and requiring immediate transfer, without the necessity of showing
economic loss and without any bond or other security being required.

 

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5.18 Further Assurances. The Purchaser agrees and covenants that at any time and
from time to time it will execute and deliver to the Company such further
instruments and documents and take such further action as the Company may
reasonably require within three (3) business days of any such request in order
to carry out the full intent and purpose of this Agreement and to comply with
state or federal securities laws or other regulatory approvals.

 

6. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL

 

The obligation of the Company hereunder to issue and sell the Note to the
Purchaser at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions thereto, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion:

 

(a) The Purchaser shall have executed this Agreement and delivered the same to
the Company.

 

(b) The Purchaser shall have delivered the Consideration in accordance with
Section 1.2 above.

 

(c) The representations and warranties of the Purchaser shall be true and
correct in all material respects as of the date when made and as of the Closing
Date, as though made at that time (except for representations and warranties
that speak as of a specific date), and the Purchaser shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchaser at or prior to the Closing Date.

 

(d) No litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.

 

  20

   

 

7. CONDITIONS TO THE PURCHASER’S OBLIGATION TO PURCHASE

 

The obligation of the Purchaser hereunder to purchase the Note, on the Closing
Date, is subject to the satisfaction, at or before the Closing Date, of each of
the following conditions, provided that these conditions are for the Purchaser’s
sole benefit and may be waived by the Purchaser at any time in its sole
discretion:

 

(a) The Company shall have executed this Agreement and delivered the same to the
Purchaser.

 

(b) The Company shall have delivered to the Purchaser the duly executed Note in
such denominations as the Purchaser shall request and in accordance with Section
1.2 above.

 

(c) Company shall have delivered to the Purchaser the Warrant.

 

(d) Company shall have delivered executed Subscription Documents or such other
instruments as contemplated by this Agreement.

 

(e) Purchaser has filed a Uniform Commercial Financing Statement evidencing a
first priority security interest in the equity interests that the Company owns
in Holdco and its other subsidiary, 1847 Neese Inc., and a third, priority
security interest in all of the assets of 1847 Goedeker that is subordinate to
the prior rights of the Senior Indebtedness (as defined in the Note) and Company
has provided the necessary documents to perfect Purchaser’s first priority
security in such equity interests owned by Company and third priority security
interest in all the assets of 1847 Goedeker.

 

(f) The Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to the Purchaser, shall have been delivered to and acknowledged in
writing by Company’s Transfer Agent.

 

(g) The representations and warranties of 1847 shall be true and correct in all
material respects as of the date when made and as of Closing Date, as though
made at such time (except for representations and warranties that speak as of a
specific date) and 1847 shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by 1847 at or prior to the
Closing Date.

 

(h) No litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.

 

  21

   

 

(i) No event shall have occurred which could reasonably be expected to have a
Material Adverse Effect on 1847 including but not limited to a change in the
Exchange Act reporting status of the Company or the failure of the Company to be
timely in its Exchange Act reporting obligations.

 

(j) Company shall have delivered to the Purchaser (i) a certificate evidencing
the formation and good standing of Company and each of its Subsidiaries in such
entity’s jurisdiction of formation issued by the Secretary of State (or
comparable office) of such jurisdiction, as of a date within ten (10) days of
the Closing Date; (ii) resolutions adopted by each of Company’s Board of
Managers, 1847 Goedeker’s Board of Directors, and Holdco’s Board of Directors,
at a duly called meeting or by unanimous written consent authorizing this
Agreement and all other documents, instruments and transactions contemplated
hereby; and (iii) lien searches for Company dated within ten (10) days of the
Closing Date and again as of the Closing Date.

 

8. MISCELLANEOUS

 

8.1 Binding Agreement. The terms and conditions of this Agreement shall inure to
the benefit of and be binding upon the respective successors and assigns of the
parties. Nothing in this Agreement, expressed or implied, is intended to confer
upon any third party any rights, remedies, obligations, or liabilities under or
by reason of this Agreement, except as expressly provided in this Agreement.

 

8.2 Governing Law; Consent to Jurisdiction. This Agreement shall be governed by
and construed under the laws of the State of New York, without giving effect to
conflicts of laws principles. Each party to this Agreement hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting in Rockland County, New York for the adjudication of any dispute
hereunder or in connection with any transaction contemplated hereby, 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 any such
court, that such suit, action or proceeding is brought in an inconvenient forum
or that the venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
(certified or registered mail, return receipt requested) to such party at the
address in effect for notices to it under this agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.

 

8.3 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Counterparts may be
delivered via facsimile, electronic mail (including pdf or any electronic
signature) or other transmission method and any counterpart so delivered shall
be deemed to have been duly and validly delivered and be valid and effective for
all purposes.

 

  22

   

 

8.4 Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.

 

8.5 Notices. All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (a) upon personal delivery to the party to be
notified, (b) when sent by confirmed electronic mail or facsimile if sent during
normal business hours of the recipient, if not, then on the next business day,
(c) five days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to 1847 at 590
Madison Avenue, 21st Floor, New York New York, 10022, Attn: Ellery Roberts,
Chief Executive Officer, and to Purchaser at the addresses set forth on the
signature page to this Agreement or at such other addresses as the Company or
Purchaser may designate by 10 days’ advance written notice to the other parties
hereto.

 

8.6 Modification; Waiver. No modification or waiver of any provision of this
Agreement or consent to departure therefrom shall be effective only upon the
written consent of the parties hereto. Any provision of the Note may be amended
or waived by the written consent of the parties thereto.

 

8.7 Expenses. The Company and the Purchaser shall each bear its respective
expenses and legal fees incurred with respect to this Agreement and the
transactions contemplated herein; provided, however, that the Purchaser may
retain $10,000 of the Consideration to cover its expenses incurred in connection
with this Agreement and the transactions contemplated hereby.

 

8.8 Delays or Omissions. It is agreed that no delay or omission to exercise any
right, power or remedy accruing to the Purchaser, upon any breach or default of
the Company under the Subscription Documents shall impair any such right, power
or remedy, nor shall it be construed to be a waiver of any such breach or
default, or any acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. It is further agreed that any waiver, permit, consent or approval of
any kind or character by Purchaser of any breach or default under this
Agreement, or any waiver by any Purchaser of any provisions or conditions of
this Agreement must be in writing and shall be effective only to the extent
specifically set forth in writing and that all remedies, either under this
Agreement, or by law or otherwise afforded to the Purchaser, shall be cumulative
and not alternative.

 

8.9 Entire Agreement. This Agreement and the Exhibits hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and no party shall be liable or bound to any other party in any
manner by any representations, warranties, covenants and agreements except as
specifically set forth herein.

 

[Signature page follows]

 

  23

   

 

In Witness Whereof, the parties have executed this Securities Purchase Agreement
as of the date first written above.

 

 

COMPANY:

 

1847 HOLDINGS LLC

 

PURCHASER:

 

LEONITE CAPITAL LLC

 

 

 

 

 

 

 

By:

/s/ Ellery W. Roberts

 

By:

/s/ Avi Geller

 

Name:

Ellery W. Roberts

 

Name:

Avi Geller

 

Title:

Chief Executive Officer

 

Title:

Chief Investment Officer

 

 

 

 

 

 

 

Address:

590 Madison Ave.

21st Floor

New York New York 10022

 

Address:

1 Hillcrest Center Dr, Suite 232

Spring Valley, NY 10977

 

 

 

 

 

1847 GOEDEKER HOLDCO INC.

 

 

 

 

 

 

 

 

By:

/s/ Robert B. Barry

 

 

 

Name:

Robert D. Barry

 

 

 

Title:

President

 

 

 

 

 

 

 

 

1847 GOEDEKER INC.

 

 

 

 

 

 

 

 

By:

/s/ Robert B. Barry

 

 

 

Name:

Robert D. Barry

 

 

 

Title:

Chief Financial Officer

 

 

 

 

[Leonite Securities Purchase Agreement – Signature page]

 

 

24