FAT BRANDS INC.

 

Maximum 1,200,000 Shares of Series B Cumulative Preferred Stock

720,000 Warrants

 

SELLING AGENCY AGREEMENT

 

October 3, 2019

 

Tripoint Global Equities, LLC

1450 Broadway, 26th Floor

New York, New York 10018

 

Digital Offering, LLC

1121 Glenneyre St.,

Laguna Beach, CA 92651

 

Ladies and Gentlemen:

 

Fat Brands Inc., a Delaware corporation (the “Company”), proposes, subject to
the terms and conditions contained in this Selling Agency Agreement (this
“Agreement”), to issue and sell on a “best efforts” basis up to a maximum of (i)
1,200,000 shares of Series B Cumulative Preferred Stock, and (ii) 720,000
warrants to investors (collectively, the “Investors”) in a public offering (the
“Offering”) pursuant to Regulation A through Tripoint Global Equities, LLC, and
its online division, Banq®, and Digital Offering LLC (collectively, the “Selling
Agents”) with Tripoint Global Equities, LLC acting as the representative of the
Selling Agents (the “Representative”), acting on a best efforts basis only, in
connection with such sales. The shares of Series B Cumulative Preferred Stock to
be sold in this Offering are referred to herein as the “Shares.” The warrants to
be sold in this Offering are referred to herein as the “Warrants,” and
collectively with the Shares, the “Offered Securities.” The Offered Securities
are more fully described in the Offering Statement (as hereinafter defined).

 

The Company hereby confirms its agreement with the Selling Agents concerning the
sale of the Offered Securities, as follows:

 

1. Agreement to Act on a Best Efforts Basis. On the basis of the
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions of this Agreement, the Selling Agents
agree to act on a best efforts basis only, in connection with the issuance and
sale by the Company of the Offered Securities to the Investors. Under no
circumstances will the Selling Agents be obligated to underwrite or purchase any
of the Offered Securities for their own account or otherwise provide any
financing. The Company will pay to the Selling Agents a fee equal to seven point
twenty eight percent (7.28%) (the “Fee”) of the gross Offering proceeds received
by the Company from the sale of the Offered Securities, which shall be allocated
by the Selling Agents to Dealers (as hereinafter defined) participating in the
Offering, in their sole discretion; as set forth on the cover page of the Final
Offering Circular (as hereinafter defined).

 

The Selling Agents shall have the right to enter into selected dealer agreements
with other broker-dealers participating in the Offering (each dealer being
referred to herein as a “Dealer” and said dealers being collectively referred to
herein as the “Dealers”). The Fee shall be re-allowable, in whole or in part, to
the Dealers. The Company will not be liable or responsible to any Dealer for
direct payment of compensation to any Dealer, it being the sole and exclusive
responsibility of the Selling Agent for payment of compensation to Dealers.

 

2. Delivery and Payment.

 

(a) On or after the date of this Agreement, the Company, the Representative and
Wilmington Trust (the “Escrow Agent”) will enter into an Escrow Agreement
substantially in the form included as an exhibit to the Offering Statement (the
“Escrow Agreement”), pursuant to which escrow accounts will be established (the
“Escrow Accounts”), at the Company’s expense, for the benefit of the investors.

 

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(b) Prior to the initial Closing Date (as hereinafter defined) of the Offering
and any subsequent Closing Date, (i) each Investor will execute and deliver a
Purchaser Questionnaire and Subscription Agreement (each, an “Investor
Subscription Agreement”) to the Company and the Company will make available to
the Selling Agent and the Escrow Agent copies of each such Investor Subscription
Agreement; (ii) each Investor will transfer to the Escrow Account funds in an
amount equal to the price per Share and accompanying Warrant as shown on the
cover page of the Final Offering Circular multiplied by the number of Shares and
accompanying Warrants subscribed by such Investor; (iii) subscription funds
received from any Investor will be promptly transmitted to the Escrow Accounts
in compliance with Rule 15c2-4 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and (iv) the Escrow Agent will notify the Company
and the Representative in writing as to the balance of the collected funds in
the Escrow Accounts.

 

(c) If the Escrow Agent shall have received written notice from the Company and
the Representative on or before 4:00 p.m., New York City time, on one or more
closing dates as may be agreed upon from time to time by the Company and the
Representative (each such date, a “Closing Date”), the Escrow Agent will release
the balance of the Escrow Accounts for collection by the Company and the
Representative as provided in the Escrow Agreement and the Company shall deliver
the Offered Securities purchased on such Closing Date to the Investors, which
delivery may be made through the facilities of the Depository Trust Company
(“DTC”) or via book entry with the Company’s securities registrar and transfer
agent, V Stock Transfer, LLC (the “Transfer Agent”). The initial closing (the
“Closing”) and any subsequent closing (each, a “Subsequent Closing”) shall take
place at the office of the Representative or such other location as the
Representative and the Company shall mutually agree. All actions taken at the
Closing shall be deemed to have occurred simultaneously on the date of the
Closing and all actions taken at any Subsequent Closing shall be deemed to have
occurred simultaneously on the date of any such Subsequent Closing.

 

(d) If the Company and the Representative determine that the Offering will not
proceed, then the Escrow Agent will promptly return the funds to the Investors
without interest.

 

(e) On each Closing Date, the Company will issue to the Selling Agents (and/or
their respective designees) warrants to purchase units equal to 1.25% of the
total securities sold in the Offering(the “Selling Agents’ Warrants”) each unit
consisting of one share of Series B Cumulative Preferred Stock and one warrant
to purchase 0.60 shares of Common Stock at $8.50 per share. The Selling Agents’
Warrants shall be in the form of Exhibit B attached hereto. The Selling Agents’
Warrants shall have an exercise price per unit equal to $25.00. The Selling
Agent’s Warrants will be exercisable at any time following the one year
anniversary of the Qualification Date (as defined below) and thereafter, and on
or before the close of business on the five (5) year anniversary of the
Qualification Date. The Selling Agents understand and agree that there are
significant restrictions pursuant to Financial Industry Regulatory Authority
(“FINRA”) Rule 5110 against transferring the Selling Agents’ Warrants and the
underlying securities during the three hundred and sixty (360) days after the
Qualification Date and by their acceptance thereof shall agree that they will
not sell, transfer, assign, pledge or hypothecate the Selling Agents’ Warrants,
or any portion thereof, or be the subject of any hedging, short sale,
derivative, put or call transaction that would result in the effective economic
disposition of such securities for a period of three hundred and sixty (360)
days following the Qualification Date to anyone other than (i) a Selling agent
or Dealer in connection with the Offering or (ii) a bona fide officer or partner
of a Selling Agent or Dealer; and only if any such transferee agrees to the
foregoing lock-up restrictions.

 

3. Representations and Warranties of the Company. The Company represents and
warrants and covenants to the Selling Agents that:

 

(a) The Company has filed with the Securities and Exchange Commission (the
“Commission”) an offering statement on Form 1-A (File No. 024-11012)
(collectively, with the various parts of such offering statement, each as
amended as of the Qualification Date for such part, including any Offering
Circular and all exhibits to such offering statement, the “Offering Statement”)
relating to the Offered Securities pursuant to Regulation A as promulgated under
the Securities Act of 1933, as amended (the “Act”), and the other applicable
rules, orders and regulations (collectively referred to as the “Rules and
Regulations”) of the Commission promulgated under the Act. As used in this
Agreement:

 

(1) “Applicable Time” means 9:00 am (Eastern time) on the date of this
Agreement;

 

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(2) “Final Offering Circular” means the final offering circular relating to the
public offering of the Offered Securities as filed with the Commission pursuant
to Regulation A of the Rules and Regulations;

 

(3) “Preliminary Offering Circular” means any preliminary offering circular
relating to the Offered Securities included in the Offering Statement pursuant
to Regulation A of the Rules and Regulations;

 

(4) “Pricing Disclosure Materials” means the most recent Preliminary Offering
Circular and the materials identified in Schedule 1 hereto;

 

(5) “Qualification Date” means the date as of which the Offering Statement was
or will be qualified with the Commission pursuant to Regulation A, the Act and
the Rules and Regulations; and

 

(6) “Testing-the-Waters Communication” means any video or written communication
with potential investors undertaken in reliance on Rule 255 of the Rules and
Regulations.

 

(b) The Offering Statement has been filed with the Commission in accordance with
the Act and Regulation A of the Rules and Regulations; no stop order of the
Commission preventing or suspending the qualification or use of the Offering
Statement, or any amendment thereto, has been issued, and no proceedings for
such purpose have been instituted or, to the Company’s, knowledge, are
contemplated by the Commission.

 

(c) The Offering Statement, at the time it became qualified, as of the date
hereof, and as of each Closing Date, conformed and will conform in all material
respects to the requirements of Regulation A, the Act and the Rules and
Regulations.

 

(d) The Offering Statement, at the time it became qualified, as of the date
hereof, and as of each Closing Date, did not and will not, contain 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.

 

(e) The Preliminary Offering Circular did not, as of its date, contain 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, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Company makes no representation or warranty with respect to the
statements contained in the Preliminary Offering Circular as provided by the
Selling Agents in Section 8(b).

 

(f) The Final Offering Circular will not, as of its date and on each Closing
Date, contain 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,
in the light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representation or warranty with
respect to the statements contained in the Final Offering Circular as provided
by the Selling Agents in Section 8(b).

 

(g) the Pricing Disclosure Materials and each Testing-the-Waters Communication,
when considered together, did not, as of the Applicable Time, contain 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, in light of the
circumstances under which they were made, not misleading, provided, however,
that the Company makes no representation or warranty with respect to the
statements contained in the Preliminary Offering Circular as provided by the
Selling Agent in Section 8(b).

 

(h) As of each Closing Date, the Company is duly organized and validly existing
as a corporation in good standing under the laws of the State of Delaware. The
Company has full power and authority to conduct all the activities conducted by
it, to own and lease all the assets owned and leased by it and to conduct its
business as presently conducted and as described in the Offering Statement, the
Pricing Disclosure Materials and the Final Offering Circular. The Company is
duly licensed or qualified to do business and in good standing as a foreign
organization in all jurisdictions in which the nature of the activities
conducted by it or the character of the assets owned or leased by it makes such
licensing or qualification necessary, except where the failure to be so
qualified or in good standing or have such power or authority would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on or affecting the business, prospects, properties, management,
financial position, stockholders’ equity, or results of operations of the
Company (a “Material Adverse Effect”). Complete and correct copies of the
certificate of incorporation, certificates of designation and of the bylaws of
the Company and all amendments thereto have been made available to the Selling
Agents, and no changes therein will be made subsequent to the date hereof and
prior to any Closing Date.

 

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(i) The Company has no subsidiaries, nor does it own a controlling interest in
any entity other than those entities set forth on Schedule 2 to this Agreement
(each a “Subsidiary” and collectively the “Subsidiaries”). Each Subsidiary has
been duly organized and is validly existing and in good standing under the laws
of its jurisdiction of formation. Each Subsidiary is duly qualified and in good
standing as a foreign company in each jurisdiction in which the character or
location of its properties (owned, leased or licensed) or the nature or conduct
of its business makes such qualification necessary, except for those failures to
be so qualified or in good standing which would not be reasonably expected to
have a Material Adverse Effect. All of the shares of issued capital stock of
each corporate subsidiary, and all of the share capital, membership interests
and/or equity interests of each subsidiary that is not a corporation, have been
duly authorized and validly issued, are fully paid and non-assessable and are
owned directly or indirectly by the Company, free and clear of any lien,
encumbrance, claim, security interest, restriction on transfer, shareholders’
agreement, proxy, voting trust or other defect of title whatsoever.

 

(j) The Company is organized in, and its principal place of business is in, the
United States.

 

(k) The Company is subject to the ongoing reporting requirements of Section 13
or 15(d) of the Exchange Act and has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
has been subject to such filing requirements for the past 90 days. The Company
has not been subject to an order by the Commission denying, suspending, or
revoking the registration of any class of securities pursuant to Section 12(j)
of the Exchange Act that was entered within five years preceding the date the
Offering Statement was originally filed with the Commission. The Company is not,
and has not been at any time during the two-year period preceding the date the
Offering Statement was originally filed with the Commission, required to file
with the Commission the ongoing reports required by the Rules and Regulations
under Regulation A.

 

(l) The Company is not, nor upon completion of the transactions contemplated
herein will it be, an “investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for, an “investment company,” as such
terms are defined in the Investment Company Act of 1940, as amended (the
“Investment Company Act”). The Company is not a development stage company or a
“business development company” as defined in Section 2(a)(48) of the Investment
Company Act. The Company is not a blank check company and is not an issuer of
fractional undivided interests in oil or gas rights or similar interests in
other mineral rights. The Company is not an issuer of asset-backed securities as
defined in Item 1101(c) of Regulation AB.

 

(m) Neither the Company, nor any predecessor of the Company; nor any other
issuer affiliated with the Company; nor any director or executive officer of the
Company or other officer of the Company participating in the Offering, nor any
beneficial owner of 20% or more of the Company’s outstanding voting equity
securities, nor any promoter connected with the Company, is subject to the
disqualification provisions of Rule 262 of the Rules and Regulations.

 

(n) The Company is not a “foreign private issuer,” as such term is defined in
Rule 405 under the Act.

 

(o) The Company has full legal right, power and authority to enter into this
Agreement and the Escrow Agreement and perform the transactions contemplated
hereby and thereby. This Agreement and the Escrow Agreement have each been
authorized and validly executed and delivered by the Company and are each a
legal, valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, subject to the effect of applicable
bankruptcy, insolvency or similar laws affecting creditors’ rights generally and
equitable principles of general applicability.

 

(p) The issuance and sale of the Offered Securities have been duly authorized by
the Company, and, when issued and paid for in accordance with this Agreement,
will be duly and validly issued, fully paid and nonassessable and will not be
subject to preemptive or similar rights. The holders of the Shares, Warrants and
securities underling the Warrants (the “Warrant Securities”) will not be subject
to personal liability by reason of being such holders. The Shares and the
Warrants, when issued, will conform to the description thereof set forth in the
Final Offering Circular in all material respects.

 

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(q) The Company has not authorized anyone other than the management of the
Company and the Selling Agents to engage in Testing-the-Waters Communications.
The Company reconfirms that the Selling Agents have been authorized to act on
the Company’s behalf in undertaking Testing-the-Waters Communications. The
Company has not distributed any Testing-the-Waters Communications other than
those listed on Schedule 1 hereto. Any individual Written Testing-the-Waters
Communication does not conflict with the information contained in the in the
Offering Statement, the Pricing Disclosure Materials and the Final Offering
Circular, complied in all material respects with the Securities Act, and when
taken together with the Pricing Disclosure Materials as of the Applicable Time,
did not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.

 

(r) The financial statements and the related notes included in the Offering
Statement, the Pricing Disclosure Materials and the Final Offering Circular
present fairly, in all material respects, the financial condition of the Company
and its Subsidiaries as of the dates thereof and the results of operations and
cash flows at the dates and for the periods covered thereby in conformity with
United States generally accepted accounting principles (“GAAP”), except as may
be stated in the related notes thereto. No other financial statements or
schedules of the Company, any Subsidiary or any other entity are required by the
Act or the Rules and Regulations to be included in the Offering Statement or the
Final Offering Circular. There are no off-balance sheet arrangements (as defined
in Regulation S-K Item 303(a)(4)(ii)) that may have a material current or future
effect on the Company’s financial condition, changes in financial condition,
results of operations, liquidity, capital expenditures or capital resources.

 

(s) Hutchinson & Bloodgood, LLP and Squar Milner LLP (collectively, the
“Accountants”), who have reported on or reviewed the financial statements and
schedules described in Section 3(r), are registered independent public
accountants with respect to the Company as required by the Act and the Rules and
Regulations and by the rules of the Public Company Accounting Oversight Board.
The financial statements of the Company and the related notes and schedules
included in the Offering Statement, the Pricing Disclosure Materials and the
Final Offering Circular comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations and present fairly the
information shown therein.

 

(t) Since the date of the most recent financial statements of the Company
included or incorporated by reference in the Offering Statement and the most
recent Preliminary Offering Circular and prior to the Closing and any Subsequent
Closing, other than as described in the Final Offering Circular (A) there has
not been and will not have been any change in the capital stock of the Company
or long-term debt of the Company or any Subsidiary or any dividend or
distribution of any kind declared, set aside for payment, paid or made by the
Company on any class of capital stock or equity interests, or any adverse
change, or any development that would reasonably be expected to have a Material
Adverse Effect ,and (B) neither the Company nor any Subsidiary has sustained or
will sustain any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor disturbance or dispute or any action, order or decree of any court or
arbitrator or governmental or regulatory authority, except in each case as
otherwise disclosed in the Offering Statement, the Pricing Disclosure Materials
and the Final Offering Circular.

 

(u) Since the date as of which information is given in the most recent
Preliminary Offering Circular, neither the Company nor any Subsidiary has
entered or will before the Closing or any Subsequent Closing enter into any
transaction or agreement, not in the ordinary course of business, that is
material to the Company and its Subsidiaries taken as a whole or incurred or
will incur any liability or obligation, direct or contingent, not in the
ordinary course of business, that is material to the Company and its
Subsidiaries taken as a whole, and neither the Company nor any Subsidiary has
any plans to do any of the foregoing.

 

(v) The Company and each Subsidiary has good and valid title in fee simple to
all items of real property and good and valid title to all personal property
described in the Offering Statement or the Final Offering Circular as being
owned by them, in each case free and clear of all liens, encumbrances and claims
except those that (1) do not materially interfere with the use made and proposed
to be made of such property by the Company and its Subsidiaries or (2) would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. Any real property described in the Offering Statement or the
Final Offering Circular as being leased by the Company or any Subsidiary that is
material to the business of the Company and its Subsidiaries taken as a whole is
held by them under valid, existing and enforceable leases, except those that (A)
do not materially interfere with the use made or proposed to be made of such
property by the Company and its Subsidiaries or (B) would not be reasonably
expected, individually or in the aggregate, to have a Material Adverse Effect.

 

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(w) There are no legal, governmental or regulatory actions, suits or proceedings
pending, either domestic or foreign, to which the Company is a party or to which
any property of the Company is the subject, nor are there, to the Company’s
knowledge, any threatened legal, governmental or regulatory investigations,
either domestic or foreign, involving the Company or any property of the Company
that, individually or in the aggregate, if determined adversely to the Company,
would reasonably be expected to have a Material Adverse Effect or materially and
adversely affect the ability of the Company to perform its obligations under
this Agreement; to the Company’s knowledge, no such actions, suits or
proceedings are threatened or contemplated by any governmental or regulatory
authority or threatened by others.

 

(x) The Company and each Subsidiary has, and at each Closing Date will have, (1)
all governmental licenses, permits, consents, orders, approvals and other
authorizations necessary to carry on its business as presently conducted except
where the failure to have such governmental licenses, permits, consents, orders,
approvals and other authorizations would not be reasonably expected to have a
Material Adverse Effect, and (2) performed all its obligations required to be
performed, and is not, and at each Closing Date will not be, in default, under
any indenture, mortgage, deed of trust, voting trust agreement, loan agreement,
bond, debenture, note agreement, lease, contract or other agreement or
instrument (collectively, a “contract or other agreement”) to which it is a
party or by which its property is bound or affected and, to the Company’s
knowledge, no other party under any material contract or other agreement to
which it is a party is in default in any respect thereunder. The Company and its
Subsidiaries are not in violation of any provision of its organizational or
governing documents.

 

(y) The Company has obtained all authorization, approval, consent, license,
order, registration, exemption, qualification or decree of, any court or
governmental authority or agency or any sub-division thereof that is required
for the performance by the Company of its obligations hereunder, in connection
with the Offering, issuance or sale of the Offered Securities and the Selling
Agents’ Securities (as defined below) under this Agreement or the consummation
of the transactions contemplated by this Agreement as may be required under
federal, state, local and foreign laws, the Act or the rules and regulations of
the Commission thereunder, state securities or Blue Sky laws, the rules and
regulations of FINRA or The Nasdaq Stock Market LLC (“NASDAQ”).

 

(z) There is no actual or, to the knowledge of the Company, threatened,
enforcement action or investigation by any governmental authority that has
jurisdiction over the Company, and the Company has received no notice of any
pending or threatened claim or investigation against the Company that would
provide a legal basis for any enforcement action, and the Company has no reason
to believe that any governmental authority is considering such action.

 

(aa) Neither the execution of this Agreement, nor the issuance, offering or sale
of the Offered Securities, nor the consummation of any of the transactions
contemplated herein, nor the compliance by the Company with the terms and
provisions hereof or thereof will conflict with, or will result in a breach of,
any of the terms and provisions of, or has constituted or will constitute a
default under, or has resulted in or will result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the Company or
any Subsidiary pursuant to the terms of any contract or other agreement to which
the Company or any Subsidiary may be bound or to which any of the property or
assets of the Company or any Subsidiary is subject, except such conflicts,
breaches or defaults as may have been waived or would not, in the aggregate, be
reasonably expected to have a Material Adverse Effect; nor will such action
result in any violation, except such violations that would not be reasonably
expected to have a Material Adverse Effect, of (1) the provisions of the
organizational or governing documents of the Company or any Subsidiary, or (2)
any statute or any order, rule or regulation applicable to the Company or any
Subsidiary or of any court or of any federal, state or other regulatory
authority or other government body having jurisdiction over the Company or any
Subsidiary.

 

(bb) There is no document or contract of a character required to be described in
the Offering Statement or the Final Offering Circular or to be filed as an
exhibit to the Offering Statement which is not described or filed as required.
All such contracts to which the Company or any Subsidiary is a party have been
authorized, executed and delivered by the Company or any Subsidiary, and
constitute valid and binding agreements of the Company or any Subsidiary, and
are enforceable against the Company in accordance with the terms thereof,
subject to the effect of applicable bankruptcy, insolvency or similar laws
affecting creditors’ rights generally and equitable principles of general
applicability. None of these contracts have been suspended or terminated for
convenience or default by the Company or any of the other parties thereto, and
the Company has not received notice of any such pending or threatened suspension
or termination.

 

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(cc) The Company and its directors, officers or controlling persons have not
taken, directly or indirectly, any action intended, or which might reasonably be
expected, to cause or result, under the Act or otherwise, in, or which has
constituted, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Company’s Common Stock.

 

(dd) Other than as previously disclosed to the Selling Agents in writing, the
Company, or any person acting on behalf of the Company, has not and, except in
consultation with the Selling Agents, will not publish, advertise or otherwise
make any announcements concerning the distribution of the Shares, and has not
and will not conduct road shows, seminars or similar activities relating to the
distribution of the Offered Securities nor has it taken or will it take any
other action for the purpose of, or that could reasonably be expected to have
the effect of, preparing the market, or creating demand, for the Offered
Securities.

 

(ee) No holder of securities of the Company has rights to the registration of
any securities of the Company as a result of the filing of the Offering
Statement or the transactions contemplated by this Agreement, except for such
rights as have been waived or as are described in the Offering Statement.

 

(ff) No labor dispute with the employees of the Company or any Subsidiary exists
or, to the knowledge of the Company, is threatened, and the Company is not aware
of any existing or threatened labor disturbance by the employees of any of its
or any Subsidiary’s principal suppliers, manufacturers, customers or
contractors.

 

(gg) The Company and each of its Subsidiaries: (i) are and have been in material
compliance with all laws, to the extent applicable, and the regulations
promulgated pursuant to such laws, and comparable state laws, and all other
local, state, federal, national, supranational and foreign laws, manual
provisions, policies and administrative guidance relating to the regulation of
the Company and its subsidiaries except for such non-compliance as would not be
reasonably expected, individually or in the aggregate, to have a Material
Adverse Effect; (ii) have not received notice of any ongoing claim, action,
suit, proceeding, hearing, enforcement, investigation, arbitration or other
action from any Regulatory Agency or third party alleging that any product
operation or activity is in material violation of any laws and has no knowledge
that any such Regulatory Agency or third party is considering any such claim,
litigation, arbitration, action, suit, investigation or proceeding; and (iii)
are not a party to any corporate integrity agreement, deferred prosecution
agreement, monitoring agreement, consent decree, settlement order, or similar
agreements, or has any reporting obligations pursuant to any such agreement,
plan or correction or other remedial measure entered into with any Governmental
Authority.

 

(hh) The business and operations of the Company, and each of its Subsidiaries,
have been and are being conducted in compliance with all applicable laws,
ordinances, rules, regulations, licenses, permits, approvals, plans,
authorizations or requirements relating to occupational safety and health, or
pollution, or protection of health or the environment (including, without
limitation, those relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants or hazardous or toxic substances, materials
or wastes into ambient air, surface water, groundwater or land, or relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of chemical substances, pollutants, contaminants or
hazardous or toxic substances, materials or wastes, whether solid, gaseous or
liquid in nature) of any governmental department, commission, board, bureau,
agency or instrumentality of the United States, any state or political
subdivision thereof, or any foreign jurisdiction (“Environmental Laws”), and all
applicable judicial or administrative agency or regulatory decrees, awards,
judgments and orders relating thereto, except where the failure to be in such
compliance would not be reasonably expected, individually or in the aggregate,
to have a Material Adverse Effect; and neither the Company nor any of its
Subsidiaries has received any notice from any governmental instrumentality or
any third party alleging any material violation thereof or liability thereunder
(including, without limitation, liability for costs of investigating or
remediating sites containing hazardous substances and/or damages to natural
resources).

 

 7 

 

 

(ii) There has been no storage, generation, transportation, use, handling,
treatment, Release or threat of Release of Hazardous Materials (as defined
below) by or caused by the Company or any of its Subsidiaries (or, to the
knowledge of the Company, any other entity (including any predecessor) for whose
acts or omissions the Company or any of its Subsidiaries is or could reasonably
be expected to be liable) at, on, under or from any property or facility now or
previously owned, operated or leased by the Company or any of its Subsidiaries,
or at, on, under or from any other property or facility, in violation of any
Environmental Laws or in a manner or amount or to a location that could
reasonably be expected to result in any liability under any Environmental Law,
except for any violation or liability which would not, individually or in the
aggregate, have a Material Adverse Effect. “Hazardous Materials” means any
material, chemical, substance, waste, pollutant, contaminant, compound, mixture,
or constituent thereof, in any form or amount, including petroleum (including
crude oil or any fraction thereof) and petroleum products, natural gas liquids,
asbestos and asbestos containing materials, naturally occurring radioactive
materials, brine, and drilling mud, regulated or which can give rise to
liability under any Environmental Law. “Release” means any spilling, leaking,
seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, disposing, depositing, dispersing, or migrating in, into or
through the environment, or in, into from or through any building or structure.

 

(jj) The Company and its Subsidiaries own, possess, license or have other
adequate rights to use, on reasonable terms, all material patents, patent
applications, trade and service marks, trade and service mark registrations,
trade names, copyrights, licenses, inventions, trade secrets, technology,
know-how and other intellectual property necessary for the conduct of the
Company’s and each of its Subsidiary’s business as now conducted (collectively,
the “Intellectual Property”), except to the extent such failure to own, possess
or have other rights to use such Intellectual Property would not result in a
Material Adverse Effect.

 

(kk) Except as would not have, individually or in the aggregate, a Material
Adverse Effect, the Company and each Subsidiary (1) has timely filed all
federal, state, provincial, local and foreign tax returns that are required to
be filed by such entity through the date hereof, which returns are true and
correct, or has received timely extensions for the filing thereof, and (2) has
paid all taxes, assessments, penalties, interest, fees and other charges due or
claimed to be due from the Company, other than (A) any such amounts being
contested in good faith and by appropriate proceedings and for which adequate
reserves have been provided in accordance with GAAP or (B) any such amounts
currently payable without penalty or interest. There are no tax audits or
investigations pending, which if adversely determined could have a Material
Adverse Effect; nor to the knowledge of the Company is there any proposed
additional tax assessments against the Company or any Subsidiary which could
have, individually or in the aggregate, a Material Adverse Effect. No
transaction, stamp, capital or other issuance, registration, transaction,
transfer or withholding tax or duty is payable by or on behalf of the Selling
Agents to any foreign government outside the United States or any political
subdivision thereof or any authority or agency thereof or therein having the
power to tax in connection with (i) the issuance, sale and delivery of the
Offered Securities by the Company; (ii) the purchase from the Company, and the
initial sale and delivery of the Shares to purchasers thereof; or (iii) the
execution and delivery of this Agreement or any other document to be furnished
hereunder.

 

(ll) On each Closing Date, all stock transfer or other taxes (other than income
taxes) which are required to be paid in connection with the sale and transfer of
the Offered Securities to be issued and sold on such Closing Date will be, or
will have been, fully paid or provided for by the Company and all laws imposing
such taxes will be or will have been fully complied with.

 

(mm) The Company and its Subsidiaries are insured with insurers with
appropriately rated claims paying abilities against such losses and risks and in
such amounts as are prudent and customary for the businesses in which they are
engaged; all policies of insurance and fidelity or surety bonds insuring the
Company, each Subsidiary or their respective businesses, assets, employees,
officers and directors are in full force and effect; and there are no claims by
the Company or its Subsidiary under any such policy or instrument as to which
any insurance company is denying liability or defending under a reservation of
rights clause; neither the Company nor any Subsidiary has been refused any
insurance coverage sought or applied for; and neither the 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 at a cost that is not materially greater than the current cost. The
Company has obtained director’s and officer’s insurance in such amounts as is
customary for a similarly situated company engaging in a public offering of
securities.

 

 8 

 

 

(nn) Neither the Company nor its Subsidiaries, nor any director, officer, agent
or employee of either the Company or any Subsidiary has directly or indirectly,
(1) made any unlawful contribution to any federal, state, local and foreign
candidate for public office, or failed to disclose fully any contribution in
violation of law, (2) made any payment to any federal, state, local and foreign
governmental officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or permitted by the laws of
the United States or any jurisdiction thereof, (3) violated or is in violation
of any provisions of the U.S. Foreign Corrupt Practices Act of 1977, or (4) made
any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.

 

(oo) The operations of the Company and its Subsidiaries are and have been
conducted at all times in compliance in all material respects with applicable
financial recordkeeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the money laundering statutes of
all jurisdictions, the rules and regulations thereunder and any related or
similar rules, regulations or guidelines, issued, administered or enforced by
any governmental agency (collectively, the “Money Laundering Laws”) and no
material action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company or any of its
Subsidiaries with respect to the Money Laundering Laws is pending or, to the
knowledge of the Company, threatened.

 

(pp) Neither the Company nor any of its Subsidiaries nor, to the knowledge of
the Company, any director, officer, agent or employee of the Company or any of
its Subsidiaries is currently subject to any U.S. sanctions (the “Sanctions
Regulations”) administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“OFAC”); and the Company will not directly or indirectly
use the proceeds of the Offering, or lend, contribute or otherwise make
available such proceeds to any subsidiary, joint venture partner or other person
or entity, for the purpose of financing the activities of any person currently
subject to any U.S. sanctions administered by OFAC or listed on the OFAC
Specially Designated Nationals and Blocked Persons List. Neither the Company
nor, to the knowledge of the Company, any director, officer, agent or employee
of the Company, is named on any denied party or entity list administered by the
Bureau of Industry and Security of the U.S. Department of Commerce pursuant to
the Export Administration Regulations (“EAR”); and the Company will not,
directly or indirectly, use the proceeds of the Offering of the Offered
Securities hereunder, or lend, contribute or otherwise make available such
proceeds to any subsidiary, joint venture partner or other person or entity, for
the purpose of financing the activities of any person currently subject to any
Sanctions Regulations or to support activities in or with countries sanctioned
by said authorities, or for engaging in transactions that violate the EAR.

 

(qq) The Company has not distributed and, prior to the later to occur of the
last Closing Date and completion of the distribution of the Offered Securities,
will not distribute any offering material in connection with the offering and
sale of the Offered Securities other than each Preliminary Offering Circular,
the Pricing Disclosure Materials and the Final Offering Circular, or such other
materials as to which the Selling Agents shall have consented in writing.

 

(rr) Each employee benefit plan, within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and all
stock purchase, stock option, stock-based severance, employment,
change-in-control, medical, disability, fringe benefit, bonus, incentive,
deferred compensation, employee loan and all other employee benefit plans,
agreements, programs, policies or other arrangements, whether or not subject to
ERISA, that is maintained, administered or contributed to by the Company or any
of its affiliates for employees or former employees, directors or independent
contractors of the Company or its Subsidiaries, or under which the Company or
any of its Subsidiaries has had or has any present or future obligation or
liability, has been maintained in material compliance with its terms and the
requirements of any applicable federal, state, local and foreign laws, statutes,
orders, rules and regulations, including but not limited to ERISA and the
Internal Revenue Code (“Code”); no prohibited transaction, within the meaning of
Section 406 of ERISA or Section 4975 of the Code, has occurred which would
result in a material liability to the Company with respect to any such plan
excluding transactions effected pursuant to a statutory or administrative
exemption; no event has occurred (including a “reportable event” as such term is
defined in Section 4043 of ERISA) and no condition exists that would subject the
Company to any material tax, fine, lien, penalty, or liability imposed by ERISA,
the Code or other applicable law; and for each such plan that is subject to the
funding rules of Section 412 of the Code or Section 302 of ERISA, no
“accumulated funding deficiency” as defined in Section 412 of the Code has been
incurred, whether or not waived, and the fair market value of the assets of each
such plan (excluding for these purposes accrued but unpaid contributions)
exceeds the present value of all benefits accrued under such plan determined
using reasonable actuarial assumptions.

 

 9 

 

 

(ss) No relationship, direct or indirect, exists between or among the Company or
any Subsidiary, on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company or any Subsidiary, on the other, which
would be required to be disclosed in the Offering Statement, the Preliminary
Offering Circular and the Final Offering Circular and is not so disclosed.

 

(tt) The Company has not sold or issued any securities that would be integrated
with the Offering pursuant to the Act, the Rules and Regulations or the
interpretations thereof by the Commission or that would fail to come within the
safe harbor for integration under Regulation A.

 

(uu) Except as set forth in this Agreement, there are no contracts, agreements
or understandings between the Company and any person that would give rise to a
valid claim against the Company or the Selling Agent for a brokerage commission,
finder’s fee or other like payment in connection with the offering of the
Offered Securities.

 

(vv) To the knowledge of the Company, there are no affiliations with FINRA among
the Company’s directors, officers or any five percent or greater stockholder of
the Company or any beneficial owner of the Company’s unregistered equity
securities that were acquired during the 180-day period immediately preceding
the initial filing date of the Offering Statement.

 

(ww) There are no outstanding loans, advances (except normal advances for
business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of their respective family members. The Company
has not directly or indirectly, including through its Subsidiaries, extended or
maintained credit, arranged for the extension of credit, or renewed any
extension of credit, in the form of a personal loan to or for any director or
executive officer of the Company or any of their respective related interests,
other than any extensions of credit that ceased to be outstanding prior to the
initial filing of the Offering Statement. No transaction has occurred between or
among the Company and any of its officers or directors, stockholders, customers,
suppliers or any affiliate or affiliates of the foregoing that is required to be
described or filed as an exhibit to in the Offering Statement, the Preliminary
Offering Circular, the Pricing Disclosure Materials or the Final Offering
Circular and is not so described.

 

(xx) The Company has the power to submit, and pursuant to Section 13 of this
Agreement, has legally, validly, effectively and irrevocably submitted, to the
personal jurisdiction of each United States federal court and New York state
court located in the Borough of Manhattan, in the City of New York, New York,
U.S.A. (each, a “New York Court”), and the Company has the power to designate,
appoint and authorize, and pursuant to Section 13 of this Agreement, has
legally, validly, effectively and irrevocably designated, appointed and
authorized an agent for service of process in any action arising out of or
relating to this Agreement or the Offered Securities in any New York Court, and
service of process effected on such authorized agent will be effective to confer
valid personal jurisdiction over the Company as provided in Section 13 hereof.

 

(yy) The Selling Agents’ Warrants have been duly authorized for issuance. The
Company has reserved a sufficient number of shares of Series B Cumulative
Preferred Stock and Common Stock for issuance upon exercise of the Selling
Agents’ Warrants and, when issued and paid for in accordance with the terms of
the Selling Agents’ Warrants, such shares of Series B Cumulative Preferred Stock
and Common Stock will be validly issued, fully paid and non-assessable (such
shares of Series B Cumulative Preferred Stock and the shares of Common Stock
underlying the warrants in the units, together with the units and the Selling
Agents’ Warrants, the “Selling Agents’ Securities”). The issuance of the Series
B Cumulative Preferred Stock and the Common Stock pursuant to the Selling
Agents’ Warrants will not be subject to any preemptive rights, rights of first
refusal or other similar rights to subscribe for or purchase securities of the
Company or any of its Subsidiaries.

 

4. Agreements of the Company.

 

(a) The Offering Statement has become qualified, and the Company will file the
Final Offering Circular, subject to the prior approval of the Selling Agent,
pursuant to Rule 253 and Regulation A, within the prescribed time period and
will provide a copy of such filing to the Selling Agent promptly following such
filing.

 

 10 

 

 

(b) The Company will not, during such period as the Final Offering Circular
would be required by law to be delivered in connection with the sale of the
Offered Securities by a Selling Agent or Dealer in connection with the Offering
(whether physically or through compliance with Rules 251 and 254 under the Act
or any similar rule(s)), file any amendment or supplement to the Offering
Statement or the Final Offering Circular unless a copy thereof shall first have
been submitted to the Selling Agents within a reasonable period of time prior to
the filing thereof and the Selling Agents shall not have reasonably objected
thereto in good faith.

 

(c) The Company will notify the Selling Agents promptly, and will, if requested,
confirm such notification in writing: (1) when any amendment to the Offering
Statement is filed; (2) of any request by the Commission for any amendments to
the Offering Statement or any amendment or supplements to the Final Offering
Circular or for additional information; (3) of the issuance by the Commission of
any stop order preventing or suspending the qualification of the Offering
Statement or the Final Offering Circular, or the initiation of any proceedings
for that purpose or the threat thereof; (4) of becoming aware of the occurrence
of any event that in the judgment of the Company makes any statement made in the
Offering Statement, the Preliminary Offering Circular, the Pricing Disclosure
Materials or the Final Offering Circular untrue in any material respect or that
requires the making of any changes in the Offering Statement, the Preliminary
Offering Circular, the Pricing Disclosure Materials or the Final Offering
Circular in order to make the statements therein, in light of the circumstances
in which they are made, not misleading; and (5) of receipt by the Company of any
notification with respect to any suspension of the qualification or exemption
from registration of the Offered Securities for offer and sale in any
jurisdiction. If at any time the Commission shall issue any order suspending the
qualification of the Offering Statement in connection with the Offering or in
connection with the sale of Offered Securities pursuant to market making
activities by the Selling Agents, the Company will make every reasonable effort
to obtain the withdrawal of any such order at the earliest possible moment. If
the Company has omitted any information from the Offering Statement, it will use
its best efforts to comply with the provisions of and make all requisite filings
with the Commission pursuant to Regulation A, the Act and the Rules and
Regulations and to notify the Selling Agents promptly of all such filings.

 

(d) If, at any time when the Final Offering Circular is required to be delivered
under the Act, the Company becomes aware of the occurrence of any event as a
result of which the Final Offering Circular, as then amended or supplemented,
would, in the reasonable judgment of counsel to the Company or counsel to the
Selling Agents, include any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, or the Offering
Statement, as then amended or supplemented, would, in the reasonable judgment of
counsel to the Company or counsel to the Selling Agents, include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein not misleading, or if for any other reason it is
necessary, in the reasonable judgment of counsel to the Company or counsel to
the Selling Agents, at any time to amend or supplement the Final Offering
Circular or the Offering Statement to comply with the Act or the Rules and
Regulations, the Company will promptly notify the Selling Agents and will
promptly prepare and file with the Commission, at the Company’s expense, an
amendment to the Offering Statement and/or an amendment or supplement to the
Final Offering Circular that corrects such statement and/or omission or effects
such compliance and will deliver to the Selling Agents, without charge, such
number of copies thereof as the Selling Agents may reasonably request. The
Company consents to the use of the Final Offering Circular or any amendment or
supplement thereto by the Selling Agents, and the Selling Agents agree to
provide to each Investor, prior to the Closing and, as applicable, any
Subsequent Closing, a copy of the Final Offering Circular and any amendments or
supplements thereto.

 

(e) The Company will furnish to the Selling Agents and their counsel, without
charge (a) one conformed copy of the Offering Statement as originally filed with
the Commission and each amendment thereto, including financial statements and
schedules, and all exhibits thereto, and (b) so long as an offering circular
relating to the Offered Securities is required to be delivered under the Act or
the Rules and Regulations, as many copies of each Preliminary Offering Circular
or the Final Offering Circular or any amendment or supplement thereto as the
Selling Agents may reasonably request.

 

(f) If at any time following the distribution of any Written Testing-the-Waters
Communication there occurred or occurs an event or development as a result of
which such Written Testing-the-Waters Communication included or would include an
untrue statement of a material fact or omitted or would omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances existing at that subsequent time, not misleading, the Company has
or will promptly notify the Selling Agent in writing and has or will promptly
amend or supplement, at its own expense, such Written Testing-the-Waters
Communication to eliminate or correct such untrue statement or omission.

 

 11 

 

 

(g) The Company will comply with any undertakings contained in the Offering
Statement.

 

(h) Prior to the sale of the Offered Securities to the Investors, the Company
will cooperate with the Selling Agents and their counsel in connection with the
registration or qualification, or exemption therefrom, of the Offered Securities
for offer and sale under the state securities or Blue Sky laws of such
jurisdictions as the Selling Agent may reasonably request; provided, that in no
event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which would
subject it to general service of process in any jurisdiction where it is not now
so subject.

 

(i) The Company will apply the net proceeds from the offering and sale of the
Offered Securities in the manner set forth in the Final Offering Circular under
the caption “Use of Proceeds.”

 

(j) The Company will not at any time, directly or indirectly, take any action
intended, or which might reasonably be expected, to cause or result in, or which
will constitute, stabilization of the price of the Offered Securities to
facilitate the sale or resale of any of the Offered Securities.

 

(k) The Company will direct its counsel to issue legal opinions to the Company’s
transfer agent, as requested by the Selling Agents, to enable the Selling Agents
to resell the shares of Series B Cumulative Preferred Stock and Common Stock
issuable upon cashless exercise of the Selling Agents’ Warrant in accordance
with the provisions of Rule 144 under the Act.

 

5. Representations and Warranties of the Selling Agents; Agreements of the
Selling Agents. Each Selling Agent, severally and not jointly, represents and
warrants and covenants to the Company that:

 

(a) The Selling Agent agrees that it shall not include any “issuer information”
(as defined in Rule 433 under the Act) in any Written Testing-the-Waters
Communication used or referred to by such Selling Agent without the prior
consent of the Company (any such issuer information with respect to whose use
the Company has given its consent, “Permitted Issuer Information”), provided
that “issuer information” (as defined in Rule 433 under the Act) within the
meaning of this Section 5 shall not be deemed to include information prepared by
the Selling Agent on the basis of, or derived from, “issuer information”.

 

(b) Neither the Selling Agent nor any Dealer, nor any managing member of the
Selling Agent or any Dealer, nor any director or executive officer of the
Selling Agent or any Dealer or other officer of the Selling Agent or any Dealer
participating in the Offering is subject to the disqualification provisions of
Rule 262 of the Rules and Regulations. No registered representative of the
Selling Agent or any Dealer, or any other person being compensated by or through
the Selling Agent or any Dealer for the solicitation of Investors, is subject to
the disqualification provisions of Rule 262 of the Rules and Regulations.

 

(c) The Selling Agent and each Dealer is a member of FINRA and each of them and
their respective employees and representatives have all required licenses and
registrations to act under this Agreement, and each shall remain a member or
duly licensed, as the case may be, during the Offering.

 

(d) Except for Participating Dealer Agreements, no agreement will be made by the
Selling Agent with any person permitting the resale, repurchase or distribution
of any Offered Securities purchased by such person.

 

(e) Except as otherwise consented to by the Company, the Selling Agent has not
and will not use or distribute any written offering materials other than the
Preliminary Offering Circular, Pricing Disclosure Materials and the Final
Offering Circular. The Selling Agent has not and will not use any “broker-dealer
use only” materials with members of the public, or has not and will not make any
unauthorized verbal representations or verbal representations which contradict
or are inconsistent with the statements made in the Offering Statement in
connection with offers or sales of the Offered Securities.

 

 12 

 

 

6. Expenses.

 

(a) Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement is terminated, the Company will pay, or reimburse
if paid by the Selling Agents, all costs and expenses incident to the
performance of the obligations of the Company under this Agreement, including
but not limited to costs and expenses of or relating to (i) the preparation,
printing and filing of the Offering Statement (including each and every
amendment thereto) and exhibits thereto, each Preliminary Offering Circular, the
Pricing Disclosure Materials, the Final Offering Circular and any amendments or
supplements thereto, including all fees, disbursements and other charges of
counsel and accountants to the Company, (ii) the preparation and delivery of
certificates representing the Shares (if any), (iii) furnishing (including costs
of shipping and mailing) such copies of the Offering Statement (including each
and every amendment thereto), each Preliminary Offering Circular, the Pricing
Disclosure Materials, the Final Offering Circular, and all amendments and
supplements thereto, as may be requested for use in connection with the direct
placement of the Offered Securities and market making activities of the Selling
Agents, (iv) any filings required to be made by the Selling Agents with FINRA,
and the fees, disbursements and other charges in connection therewith, and in
connection with any required review by FINRA, (v) the registration or
qualification of the Offered Securities and the Selling Agents’ Securities (as
defined in Section 3(yy)) for offer and sale under the securities or Blue Sky
laws of such jurisdictions designated pursuant to Section 4(h), including the
fees, disbursements and other charges of counsel in connection therewith, and
the preparation and printing of preliminary, supplemental and final Blue Sky
memoranda, (vi) the fees of counsel to the Selling Agents in connection with the
Offering up to a maximum of $75,000, (vii) all transfer taxes, if any, with
respect to the sale and delivery of the Offered Securities by the Company to the
Investors, (viii) fees and disbursements of the Accountants incurred in
delivering the letter(s) described in Section 7(g) of this Agreement; (ix) the
fees and expenses of the Escrow Agent; (x) transportation, accommodation, and
other roadshow expenses (up to a maximum of $10,000 which will be pre-approved
by the Company, $5,000 of which was already paid to the Selling Agents as an
advance against reimbursable expenses); and (xi) a $20,000 due diligence fee
payable on the first closing.

 

(b) If this Agreement is terminated by the Selling Agents in accordance with the
provisions of Section 7, Section 9(a)(i), (iv) or (vi), the Company shall
reimburse the Selling Agents for all of their documented out-of-pocket expenses,
including the fees of their counsel (upon abandonment of the Offering or
expiration or termination of this Agreement, the legal counsel shall submit
their legal fees to the Company, not to exceed $75,000) (“Reimbursable
Expenses”).

 

7. Conditions of the Obligations of the Selling Agents. The obligations of the
Selling Agents hereunder are subject to the following conditions:

 

(a) (i) No stop order suspending the qualification of the Offering Statement
shall have been issued, and no proceedings for that purpose shall be pending or
threatened by any securities or other governmental authority (including, without
limitation, the Commission), (ii) no order suspending the effectiveness of the
Offering Statement or the qualification or exemption of the Offered Securities
under the securities or Blue Sky laws of any jurisdiction shall be in effect and
no proceeding for such purpose shall be pending before, or threatened or
contemplated by, any securities or other governmental authority (including,
without limitation, the Commission), (iii) any request for additional
information on the part of the staff of any securities or other governmental
authority (including, without limitation, the Commission) shall have been
complied with to the satisfaction of the staff of the Commission or such
authorities and (iv) after the date hereof no amendment or supplement to the
Offering Statement or the Final Offering Circular shall have been filed unless a
copy thereof was first submitted to the Selling Agents and the Selling Agents
did not object thereto in good faith, and the Selling Agents shall have received
certificates of the Company, dated as of each Closing Date and signed by the
President and Chief Executive Officer of the Company, and the Chief Financial
Officer of the Company, to the effect of clauses (i), (ii) and (iii).

 

(b) Since the respective dates as of which information is given in the Offering
Statement, the Pricing Disclosure Materials and the Final Offering Circular, (i)
there shall not have been a Material Adverse Change, whether or not arising from
transactions in the ordinary course of business, in each case other than as set
forth in or contemplated by the Offering Statement, the Pricing Disclosure
Materials and the Final Offering Circular and (ii) the Company shall not have
sustained any material loss or interference with its business or properties from
fire, explosion, flood or other casualty, whether or not covered by insurance,
or from any labor dispute or any court or legislative or other governmental
action, order or decree, which is not set forth in the Offering Statement, the
Pricing Disclosure Materials and the Final Offering Circular, if in the
reasonable judgment of the Representative any such development makes it
impracticable or inadvisable to consummate the sale and delivery of the Offered
Securities to Investors and the delivery of the Selling Agents’ Securities as
contemplated hereby.

 

 13 

 

 

(c) Since the respective dates as of which information is given in the Offering
Statement, the Pricing Disclosure Materials and the Final Offering Circular,
there shall have been no litigation or other proceeding instituted against the
Company or any of its officers or directors in their capacities as such, before
or by any federal, state or local or foreign court, commission, regulatory body,
administrative agency or other governmental body, domestic or foreign, which
litigation or proceeding, in the reasonable judgment of the Selling Agents,
would reasonably be expected to have a Material Adverse Effect.

 

(d) Each of the representations and warranties of the Company contained herein
shall be true and correct as of each Closing Date in all respects for those
representations and warranties qualified by materiality and in all material
respects for those representations and warranties that are not qualified by
materiality, as if made on such date, and all covenants and agreements herein
contained to be performed on the part of the Company and all conditions herein
contained to be fulfilled or complied with by the Company at or prior to such
Closing Date shall have been duly performed, fulfilled or complied with in all
material respects.

 

(e) The Selling Agents shall have received an opinion and 10b-5 negative
assurances letter, dated as of each Closing Date, of Loeb & Loeb LLP, as counsel
to the Company, substantially in the form of Exhibit A hereto.

 

(f) The Selling Agents shall have received 10b-5 negative assurances letter,
dated as of each Closing Date, of Hunter Taubman Fischer & Li LLC, as counsel to
the Selling Agents.

 

(g) At the Closing and at any Subsequent Closing, the Accountants shall have
furnished to the Selling Agents a letter, dated the date of its delivery (the
“Comfort Letter”), addressed to the Selling Agents and in form and substance
reasonably satisfactory to the Selling Agents containing statements and
information of the type ordinarily included in accountants’ “comfort letters” to
Selling Agents with respect to the financial statements and certain financial
information contained in the Offering Statement, the Pricing Disclosure
Materials and the Final Offering Circular.

 

(h) At the Closing and at any Subsequent Closing, there shall be furnished to
the Selling Agents a certificate, dated the date of its delivery, signed by each
of the Chief Executive Officer and the Chief Financial Officer of the Company,
in form and substance satisfactory to the Selling Agents to the effect that each
signer has carefully examined the Offering Statement, the Final Offering
Circular and the Pricing Disclosure Materials, and that to each of such person’s
knowledge:

 

(i) (1) As of the date of each such certificate, (x) the Offering Statement does
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading and (y) neither the Final Offering Circular nor the
Pricing Disclosure Materials contains any untrue statement of a material fact or
omit 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 and (2) no event has occurred as a result of
which it is necessary to amend or supplement the Final Offering Circular in
order to make the statements therein not untrue or misleading in any material
respect.

 

(ii) Each of the representations and warranties of the Company contained in this
Agreement were, when originally made, and are, at the time such certificate is
delivered, true and correct in all respects for those representations and
warranties qualified by materiality and in all material respects for those
representations and warranties that are not qualified by materiality.

 

(iii) Each of the covenants required herein to be performed by the Company on or
prior to the date of such certificate has been duly, timely and fully performed
and each condition herein required to be complied with by the Company on or
prior to the delivery of such certificate has been duly, timely and fully
complied with.

 

(iv) No stop order suspending the qualification of the Offering Statement or of
any part thereof has been issued and no proceedings for that purpose have been
instituted or are contemplated by the Commission.

 

 14 

 

 

(v) Subsequent to the date of the most recent financial statements in the
Offering Statement and in the Final Offering Circular, there has been no
Material Adverse Change.

 

(i) The Company shall have furnished or caused to be furnished to the Selling
Agents such certificates, in addition to those specifically mentioned herein, as
the Selling Agents may have reasonably requested as to the accuracy and
completeness on any Closing Date of any statement in the Offering Statement, the
Preliminary Offering Circular, the Pricing Disclosure Materials or the Final
Offering Circular, as to the accuracy on such Closing Date of the
representations and warranties of the Company as to the performance by the
Company of its obligations hereunder, or as to the fulfillment of the conditions
concurrent and precedent to the obligations hereunder of the Selling Agents.

 

(j) The Common Stock shall be quoted on the NASDAQ.

 

(k) The Company shall have furnished or caused to be furnished to the Selling
Agents on each Closing Date satisfactory evidence of the good standing of the
Company and the Subsidiaries in their respective jurisdiction of organization
and their good standing as foreign entities in such other jurisdictions as the
Selling Agents may reasonably request, in each case in writing or any standard
form of telecommunication from the appropriate governmental authorities of such
jurisdictions.

 

(l) FINRA shall not have raised any objection with respect to the fairness or
reasonableness of the plan of distribution, or other arrangements of the
transactions, contemplated hereby.

 

(m) On or after the Applicable Time there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the NASDAQ; (ii) a general moratorium on commercial banking
activities declared by either Federal or New York authorities or a material
disruption in commercial banking or securities settlement or clearance services
in the United States; (iii) the outbreak or escalation of hostilities involving
the United States or the declaration by the United States of a national
emergency or war or (iv) the occurrence of any other calamity or crisis or any
change in financial, political or economic conditions in the United States or
elsewhere, if the effect of any such event specified in clause (iii) or (iv) in
the judgment of the Selling Agents makes it impracticable or inadvisable to
proceed with the Offering or the delivery of the Offered Securities being
delivered on any Closing Date on the terms and in the manner contemplated in the
Final Offering Circular.

 

8. Indemnification.

 

(a) The Company shall indemnify, defend and hold harmless the Selling Agents and
each of the Dealers, and each of their respective directors, officers, employees
and agents and each person, if any, who controls any Selling Agent within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act (each a
“Selling Agent Indemnified Party”), from and against any and all losses, claims,
liabilities, expenses and damages, joint or several (including any and all
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted (whether or not such Indemnified Party is a party thereto)), to
which any of them, may become subject under the Act or other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, liabilities, expenses or damages arise out of or are based on (i) any
untrue statement or alleged untrue statement made by the Company in Section 3 of
this Agreement, (ii) any untrue statement or alleged untrue statement of any
material fact contained in (1) any Preliminary Offering Circular, the Offering
Statement or the Final Offering Circular or any amendment or supplement thereto,
(2) the Pricing Disclosure Materials, (3) any Written Testing-the-Waters
Communication or (4) any application or other document, or any amendment or
supplement thereto, executed by the Company based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
qualify the Offered Securities under the securities or Blue Sky laws thereof or
filed with the Commission or any securities association or securities exchange
(each, an “Application”), or (iii) the omission or alleged omission to state in
any Preliminary Offering Circular, the Offering Statement, the Final Offering
Circular, the Pricing Disclosure Materials, or any Written Testing-the-Waters
Communication, or any amendment or supplement thereto, or in any Permitted
Issuer Information or any Application a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
the Company will not be liable to the extent that such loss, claim, liability,
expense or damage arises from the sale of the Offered Securities in the Offering
to any person and is based solely on an untrue statement or omission or alleged
untrue statement or omission made in reliance on and in conformity with written
information furnished to the Company by any Selling Agents Indemnified Party
through the Selling Agents expressly for inclusion in the Offering Statement,
any Preliminary Offering Circular, the Final Offering Circular, or Written
Testing-the-Waters Communication, or in any amendment or supplement thereto or
in any Application, it being understood and agreed that the only such
information furnished by any Selling Agents Indemnified Party consists of the
information described as such in subsection (b) below. The indemnification
obligations under this Section 8(b) are not exclusive and will be in addition to
any liability which the Company might otherwise have and shall not limit any
rights or remedies which may otherwise be available at law or in equity to each
Selling Agent Indemnified Party.

 

 15 

 

 

(b) Each Selling Agent, severally and not jointly, will indemnify, defend and
hold harmless the Company against any losses, claims, damages or liabilities to
which the Company may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof) that
(i) arise out of or are based upon any untrue statement made by the Selling
Agent in Section 5 of this Agreement, (ii) arise out of or are based upon any
failure or alleged failure of the Selling Agent to pay any compensation to a
Dealer or Dealers, or (iii) arise out of or are based solely upon an untrue
statement or alleged untrue statement of a material fact contained in the
Offering Statement, any Preliminary Offering Circular or the Final Offering
Circular, or any amendment or supplement thereto, or any Written
Testing-the-Waters Communication, or arise out of or are based solely upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Offering Statement, any Preliminary Offering Circular or the Final Offering
Circular, or any amendment or supplement thereto, or any Written
Testing-the-Waters Communication, in reliance upon and in conformity with
written information furnished to the Company by the Selling Agent expressly for
use therein; and will reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
any such action or claim as such expenses are incurred. The Company acknowledges
that, for all purposes under this Agreement, the statements set forth in the
paragraphs under the caption “Plan of Distribution” in any Preliminary Offering
Circular and the Final Offering Circular constitute the only information
relating to the Selling Agent furnished in writing to the Company by the Selling
Agent expressly for inclusion in the Offering Statement, any Preliminary
Offering Circular or the Final Offering Circular. In no event shall the Selling
Agent indemnify the Company for any amounts in excess of the fees actually
received by it pursuant to the terms of this Agreement.

 

(c) Promptly after receipt by an indemnified party under subsection (a) or (b)
above of notice of the commencement of any action, such indemnified party shall,
if a claim in respect thereof is to be made against the indemnifying party under
such subsection, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party shall not relieve
it from any liability which it may have to any indemnified party otherwise than
under such subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and, after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party under such subsection for any legal expenses of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
any Indemnified Party.

 

 16 

 

 

(d) If the indemnification provided for in this Section 8 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Selling Agent on the other from the
offering of the Offering Securities. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
Indemnified Party failed to give the notice required under subsection (c) above,
then each indemnifying party shall contribute to such amount paid or payable by
such Indemnified Party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company on the one
hand and the Selling Agent on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Selling Agents on the other shall be deemed to be in the same proportion
as the total net proceeds from the Offering (before deducting expenses) received
by the Company bears to the Fee received by the Selling Agents. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Selling Agents on the other and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Selling Agents agree that it
would not be just and equitable if contribution pursuant to this subsection (d)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this subsection (d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subsection (d) shall be deemed to include any
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Selling Agent will be
required to contribute any amount in excess of the Fee received by such Selling
Agent pursuant to this Agreement. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.

 

9. Termination.

 

(a) The obligations of the Selling Agents under this Agreement may be terminated
at any time prior to the initial Closing Date, by notice to the Company from the
Representative, without liability on the part of the Selling Agents to the
Company if, prior to delivery and payment for the Offered Securities, in the
sole judgment of the Representative: (i) there has occurred any material adverse
change in the securities markets or any event, act or occurrence that has
materially disrupted, or in the opinion of the Representative, will in the
future materially disrupt, the securities markets or there shall be such a
material adverse change in general financial, political or economic conditions
or the effect of international conditions on the financial markets in the United
States is such as to make it, in the judgment of the Representative, inadvisable
or impracticable to market the Offered Securities or enforce contracts for the
sale of the Offered Securities; (ii) there has occurred any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, including without limitation as a
result of terrorist activities, such as to make it, in the judgment of the
Representative, inadvisable or impracticable to market the Offered Securities or
enforce contracts for the sale of the Offered Securities; (iii) trading in any
securities of the Company has been suspended or materially limited; (iv) trading
generally on the NASDAQ has been suspended or materially limited, or minimum or
maximum ranges for prices for securities shall have been fixed, or maximum
ranges for prices for securities have been required, by any of said exchanges or
by such system or by order of the Commission, FINRA, or any other governmental
or regulatory authority; (v) a banking moratorium has been declared by any state
or Federal authority; or (vi) in the judgment of the Representative, there has
been, since the time of execution of this Agreement or since the respective
dates as of which information is given in the Final Offering Circular, any
material adverse change in the assets, properties, condition, financial or
otherwise, or in the results of operations, business affairs or business
prospects of the Company and its Subsidiaries considered as a whole, whether or
not arising in the ordinary course of business.

 

(b) If this Agreement is terminated pursuant to this Section, such termination
shall be without liability of any party to any other party except as provided in
Section 6 hereof.

 

10. Notices. Notice given pursuant to any of the provisions of this Agreement
shall be in writing and, unless otherwise specified, shall be mailed, sent via
facsimile or emailed as follows. Any such notice shall be effective only upon
receipt.

 

 17 

 

 

If to the Company:

 

Fat Brands Inc.

Attention: Andrew Wiederhorn

9720 Wilshire Blvd. Suite 500

Beverly Hills, California 90212

Email:

 

With copies to (which shall not constitute notice):

 

Loeb & Loeb LLP

Attention: Allen Sussman, Esq.

10100 Santa Monica Blvd.

Los Angeles, California 90067

Email:

 

If to the Selling Agents:

 

Tripoint Global Equities, LLC

Attention: Mark Elenowitz,

1450 Broadway, 26th Floor

New York, New York 10018

Email:

 

Digital Offering, LLC

Attn: Gordon McBean

1121 Glenneyre St.

Laguna Beach, CA 92651

Email:

 

With copies to (which shall not constitute notice):

 

Hunter Taubman Fischer & Li LLC

Attention: Louis Taubman Esq.

1450 Broadway, 26th Floor

New York, New York 10018.

Email:

 

11. Survival. The respective representations, warranties, agreements, covenants,
indemnities and other statements of the Company and the Selling Agents set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company, any of its officers or
directors, the Selling Agents or any controlling person referred to in Section 8
hereof and (ii) delivery of and payment for the Offered Securities. The
respective agreements, covenants, indemnities and other statements set forth in
Sections 6, 7, 8, 10, and 13 hereof shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement.

 

12. Successors. This Agreement shall inure to the benefit of and shall be
binding upon the Selling Agent, the Company and their respective successors, and
nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or claim
under or in respect of this Agreement, or any provisions herein contained, this
Agreement and all conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of such persons and for the benefit of
no other person except that (i) the indemnification and contribution contained
in Sections 8(a) and (b) of this Agreement shall also be for the benefit of the
directors, officers, employees and agents of any Selling Agent and any person or
persons who control any Selling Agent within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act and (ii) the indemnification and
contribution contained in Sections 8(b) and (d) of this Agreement shall also be
for the benefit of the directors of the Company, the officers of the Company who
have signed the Offering Statement and any person or persons who control the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act. No purchaser of Offered Securities shall be deemed a successor
because of such purchase.

 

 18 

 

 

13. Governing Law Provisions. The validity and interpretation of this Agreement
shall be governed by and construed in accordance with the internal laws of the
State of New York without giving effect to any provisions relating to conflicts
of laws. Any legal suit, action or proceeding arising out of or based upon this
Agreement or the transactions contemplated hereby (“Related Proceedings”) may be
instituted in the New York Courts, and each party irrevocably submits to the
exclusive jurisdiction (except for proceedings instituted in regard to the
enforcement of a judgment of any such court (a “Related Judgment”), as to which
such jurisdiction is non-exclusive) of such courts in any such suit, action or
proceeding. Service of any process, summons, notice or document by mail to such
party’s address set forth above shall be effective service of process for any
suit, action or other proceeding brought in any such court. The parties
irrevocably and unconditionally waive any objection to the laying of venue of
any suit, action or other proceeding in the New York Courts and irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such suit, action or other proceeding brought in any such court has been brought
in an inconvenient forum.

 

With respect to any Related Proceeding, each party irrevocably waives, to the
fullest extent permitted by applicable law, all immunity (whether on the basis
of sovereignty or otherwise) from jurisdiction, service of process, attachment
(both before and after judgment) and execution to which it might otherwise be
entitled in the New York Courts, and with respect to any Related Judgment, each
party waives any such immunity in the New York Courts or any other court of
competent jurisdiction, and will not raise or claim or cause to be pleaded any
such immunity at or in respect of any such Related Proceeding or Related
Judgment, including, without limitation, any immunity pursuant to the United
States Foreign Sovereign Immunities Act of 1976, as amended.

 

The obligations of the Company pursuant to this Agreement in respect of any sum
due to the Selling Agents shall, notwithstanding any judgment in a currency
other than United States dollars, not be discharged until the first business day
following receipt by the Selling Agents of any sum adjudged to be so due in such
other currency, on which the Selling Agents may in accordance with normal
banking procedures purchase United States dollars with such other currency. If
the United States dollars so purchased are less than the sum originally due to
the Selling Agents in United States dollars hereunder, the Company agrees as a
separate obligation and notwithstanding any such judgment, to indemnify the
Selling Agent against such loss. If the United States dollars so purchased are
greater than the sum originally due to the Selling Agents hereunder, the Selling
Agents agree to pay to the Company an amount equal to the excess of the dollars
so purchased over the sum originally due to the Selling Agents hereunder.

 

14. Acknowledgement. The Company acknowledges and agrees that each Selling Agent
is acting solely in the capacity of an arm’s length contractual counterparty to
the Company with respect to the Offering. Additionally, no Selling Agent is
advising the Company or any other person as to any legal, tax, investment,
accounting or regulatory matters in any jurisdiction with respect to the
Offering contemplated hereby or the process leading thereto (irrespective of
whether a Selling Agent has advised or is advising the Company on other
matters). The Company has conferred with its own advisors concerning such
matters and shall be responsible for making its own independent investigation
and appraisal of the transactions contemplated hereby, and the Selling Agents
shall have no responsibility or liability to the Company or any other person
with respect thereto. The Selling Agents advise that they and their respective
affiliates are engaged in a broad range of securities and financial services and
that they or their affiliates may have business relationships or enter into
contractual relationships with purchasers or potential purchasers of the
Company’s securities. Any review by the Selling Agents of the Company, the
transactions contemplated hereby or other matters relating to such transactions
will be performed solely for the benefit of the Selling Agents and shall not be
on behalf of, or for the benefit of, the Company.

 

15. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

 

16. Entire Agreement. This Agreement constitutes the entire understanding
between the parties hereto as to the matters covered hereby and supersedes all
prior understandings, written or oral, relating to such subject matter.

 

[Signature Page Follows]

 

 19 

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement on the dates set
forth below.

 

FAT BRANDS INC.         By: /s/ Andrew Wiederhorn   Name: Andrew Wiederhorn  
Title: CEO         Accepted as of the date hereof:         TRIPOINT GLOBAL
EQUITIES, LLC         By: /s/ Mark Elenowitz   Name: Mark Elenowitz   Title:
Chief Executive Officer         DIGITAL OFFERING, LLC         By: /s/ Gordon
McBean   Name: Gordon McBean   Title: Chief Executive Officer  

 

 20 

 

 

Schedule 1

 

Pricing Disclosure Materials and Testing-the-Waters Communications

 

None.

 

   

 

 

Schedule 2

 

Subsidiaries

 

Fatburger North America, Inc.

Buffalo’s Franchise Concepts, Inc.

Ponderosa Franchising Company

Bonanza Restaurant Company

Ponderosa International Development, Inc.
Puerto Rico Ponderosa, Inc.

Hurricane AMT, LLC

Yalla Mediterranean Franchising Company, LLC
Yalla Acquisition, LLC

EB Franchises, LLC

 

   

 

 

Exhibit A

 

10b-5 and Negative Assurances Letter

 

 

 

 

Exhibit B

 

Selling Agency Warrants

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED, OR BE THE SUBJECT OF ANY
HEDGING, SHORT SALE, DERIVATIVE, PUT, OR CALL TRANSACTION THAT WOULD RESULT IN
THE EFFECTIVE ECONOMIC DISPOSITION OF SUCH SECURITIES BY ANY PERSON FOR A PERIOD
OF THREE HUNDRED AND SIXTY (360) DAYS IMMEDIATELY FOLLOWING THE QUALIFICATION
DATE OF THE PUBLIC OFFERING OF THE COMPANY’S SECURITIES PURSUANT TO OFFERING
STATEMENT NO. 024-11012, AS FILED WITH THE U.S. SECURITIES AND EXCHANGE
COMMISSION, EXCEPT IN ACCORDANCE WITH FINRA RULE 5110(g)(2).

 

FAT BRANDS INC.

 

UNIT PURCHASE WARRANT

 

Units: [●] Issuance Date: [●], 2019

 

THIS UNIT PURCHASE WARRANT (the “Warrant”) certifies that, for value received,
[Tripoint Global Equities, LLC/ Digital Offering, LLC] 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 following the one year
anniversary of the qualification date of the Offering Statement (the “Initial
Exercise Date”) and thereafter, and on or before the close of business on the
five (5) year anniversary of the qualification date of the Offering Statement
(the “Termination Date”) but not thereafter, to subscribe for and purchase from
Fat Brands Inc., a Delaware corporation (the “Company”), up to [●]1 units
(“Units”) sold pursuant to the Offering Statement, each unit consisting of one
share of Series B Cumulative Preferred Stock (“Series B Cumulative Preferred
Stock”) and one warrant to purchase 0.60 shares of common stock par value
$0.0001 per share of the Company (“Common Stock”) at $8.50 per share (as subject
to adjustment hereunder, collectively, the “Warrant Securities”). The purchase
price of one Unit under this Warrant shall be equal to the Exercise Price, as
defined in Section 2(b).

 

Section 1. Definitions.

 

Capitalized terms used and not otherwise defined herein shall have the meanings
set forth in the Selling Agency Agreement, dated October [●], 2019 (the
“Agreement”), by and among the Company, Tripoint Global Equities, LLC and
Digital Offering, LLC.

 

Section 2. Exercise.

 

(a) Method of Exercise. Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by delivery to the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of the Holder
appearing on the books of the Company) of a duly executed facsimile copy of the
Notice of Exercise form annexed hereto (the “Notice of Exercise”). Within three
(3) trading days after the date of exercise as aforesaid, the Holder shall
deliver the aggregate Exercise Price for the Warrant Securities 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 available and specified in the applicable Notice of Exercise.
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 Securities 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 Securities available hereunder shall have the effect of lowering the
outstanding number of Warrant Securities purchasable hereunder in an amount
equal to the applicable number of Warrant Securities purchased. The Holder and
the Company shall maintain records showing the number of Warrant Securities
purchased and the date of such purchases; provided that the records of the
Company, absent manifest error, will be conclusive with respect to the number of
Warrant Shares purchasable from time to time hereunder. The Company shall
deliver any objection to any Notice of Exercise within two (2) business days
after 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 Securities
hereunder, the number of Warrant Securities available for purchase hereunder at
any given time may be less than the amount stated on the face hereof.

 

 

 

 

1 The number of units issuable upon exercise of this Warrant shall be equal to
1.25% of the total securities sold in the Offering.

 

(b) Exercise Price. The exercise price per unit under this Warrant shall be
$25.00, subject to adjustment hereunder (the “Exercise Price”). Except as where
otherwise permitted in accordance with Section 2(c), this Warrant may only be
exercised by means of payment by wire transfer or cashier’s check drawn on a
United States bank.

 

(c) Cashless Exercise. This Warrant may at the option of the Holder 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 Securities
equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) = the VWAP on the trading day immediately preceding the date on which Holder
elects to exercise this Warrant by means of a “cashless exercise,” as set forth
in the applicable Notice of Exercise;

 

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

 

(X) = the number of Warrant Securities 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.

 

“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Units are then listed or quoted on a Trading
Market (as defined below), the daily volume weighted average price of the Units
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.
(“Bloomberg”) (based on a trading day from 9:30 a.m., Eastern time, to 4:00
p.m., Eastern time), (b) if the OTC Bulletin Board or any market, exchange or
quotation system maintained by the OTC Markets Group, Inc., including, without
limitation, OTCQB, OTCQX or OTC Pink (or any successors of the foregoing) is not
a Trading Market and the Units are then traded on such market, exchange or
quotation system, the volume weighted average price of the Units for such date
(or the nearest preceding date) on such market, exchange or quotation system or
(c) in all other cases, the fair market value of a Unit as determined by an
independent appraiser selected in good faith by the board of directors of the
Company and reasonably acceptable to the Holder, the fees and expenses of which
shall be paid by the Company.

 

“Trading Market” means the NYSE:MKT, Nasdaq Capital Market, Nasdaq Global
Market, Nasdaq Global Select Market, or any other national securities exchange,
market, or trading or quotation facility on which the Units are then listed or
quoted.

 

(d) Mechanics of Exercise.

 

(i) Delivery of Warrant Securities Upon Exercise. The Company shall use its best
efforts to cause the Warrant Securities purchased hereunder to be transmitted by
the Company’s stock transfer agent and registrar (the “Transfer Agent”) to the
Holder by physical delivery to the address specified by the Holder in the Notice
of Exercise by the date that is five (5) trading days after the latest of (A)
the delivery to the Company of the Notice of Exercise, (B) surrender of this
Warrant (if required) and (C) payment of the aggregate Exercise Price as set
forth above (including by cashless exercise, if permitted) (such date, the
“Warrant Securities Delivery Date”). The Warrant Securities shall be deemed to
have been issued, and the Holder or any other person so designated to be named
therein shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the Warrant has been exercised, with payment to the
Company of the Exercise Price (or by cashless exercise, if permitted) and all
taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi)
before the issuance of such shares, having been paid.

 

 

 

 

(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, at the time of delivery of the Warrant Securities,
deliver to the Holder a new Warrant evidencing the rights of the Holder to
purchase the unpurchased Warrant Securities 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 Securities 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 Securities
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
Securities pursuant to an exercise on or before the Warrant Securities 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 Series B Cumulative Preferred Stock or Common
Stock to deliver in satisfaction of a sale by the Holder of the Warrant
Securities 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 Series B Cumulative Preferred Stock
Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the
number of Warrant Securities 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 Securities 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 Series B Cumulative Preferred Stock or 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
Warrant Securities upon exercise of the Warrant as required pursuant to the
terms hereof.

 

(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 Securities 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 Securities, all of which
taxes and expenses shall be paid by the Company, and such Warrant Securities
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 Securities
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.

 

(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 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 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
(as defined below), and any other Persons (as defined below) acting as a group
together with the Holder or any of the Holder’s Affiliates), would beneficially
own in excess of the Beneficial Ownership Limitation (as defined below). For
purposes of the foregoing sentence, the number of shares of Series B Cumulative
Preferred Stock and Common Stock beneficially owned by the Holder and its
Affiliates shall include the number of shares of Series B Cumulative Preferred
Stock and the number of shares of Common Stock underlying the warrants issuable
upon exercise of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Series B Cumulative Preferred
Stock and 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 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, as defined
below) subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder or any of its
Affiliates. 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 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, and representation and certification to the Company that, this Warrant
is exercisable (in relation to other securities owned by the Holder together
with any Affiliates) 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 Series B Cumulative Preferred
Stock and Common Stock, a Holder may rely on the number of outstanding shares of
Series B Cumulative Preferred Stock and Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with the Securities and
Exchange Commission (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 Series B
Cumulative Preferred Stock and Common Stock outstanding. Upon the written or
oral request of a Holder, the Company shall within two (2) trading days confirm
orally and in writing to the Holder the number of shares of Series B Cumulative
Preferred Stock and Common Stock then outstanding. In any case, the number of
outstanding shares of Series B Cumulative Preferred Stock and 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 since the
date as of which such number of outstanding shares of Series B Cumulative
Preferred Stock and Common Stock was reported. The “Beneficial Ownership
Limitation” shall be 4.99% of the number of shares of Series B Cumulative
Preferred Stock and Common Stock outstanding immediately after giving effect to
the issuance of shares of Series B Cumulative Preferred Stock and the number of
shares of Common Stock underlying the warrants issuable upon exercise of this
Warrant. The Holder, upon not less than 61 days’ prior written 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 Series B Cumulative Preferred
Stock and Common Stock outstanding immediately after giving effect to the
issuance of shares Series B Cumulative Preferred Stock and the number of shares
of Common Stock underlying the warrants issuable upon exercise of this Warrant
held by the Holder and the provisions of this Section 2(e) shall continue to
apply. Any such increase or decrease 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.

 

“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.

 

“Common Stock Equivalents” means any securities of the Company 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.

 

 

 

 

“Person” means any natural person, corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, or association.

 

(f) Exercise Limitations Due to Tax Considerations. If the Holder delivers a
Notice of Exercise but the Company determines in good faith that the issuance of
Warrant Shares upon such exercise of the Warrant would cause the Company to lose
its ability to be included with Fog Cutter Capital Group, Inc. in a consolidated
federal income tax return, in a California unitary income tax return, or in an
Oregon consolidated income tax return, then the Company may, in lieu of
delivering Warrant Securities upon such exercise, instead deliver an amount of
cash within ten (10) business days of the Notice of Exercise that is equal to
the VWAP of the Warrant Securities that would be deliverable to the Holder had
the Holder elected a “cashless exercise” of the Warrant for the same number of
shares specified in the Notice of Exercise.

 

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 Series B Cumulative Preferred Stock, Common Stock
or any other equity or equity equivalent securities payable in shares of Series
B Cumulative Preferred Stock or Common Stock (which, for avoidance of doubt,
shall not include any shares of Series B Cumulative Preferred Stock or any
shares of Common Stock issuable upon exercise of the warrants to be issued by
the Company upon exercise of this Warrant), (ii) subdivides outstanding shares
of Series B Cumulative Preferred Stock or Common Stock into a larger number of
shares, (iii) combines (including by way of reverse stock split) outstanding
shares of Series B Cumulative Preferred Stock or Common Stock into a smaller
number of shares, or (iv) issues by reclassification of shares of Series B
Cumulative Preferred Stock or Common Stock any shares of capital stock of the
Company, then in each case the number of Warrant Securities 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 during which this Warrant is outstanding the
Company grants, issues or sells any Common Stock Equivalents or other rights to
purchase stock, warrants, securities or other property pro rata to the record
holders of any shares of Series B Cumulative Preferred Stock or 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
Series B Cumulative Preferred Stock or 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 Series B Cumulative Preferred Stock or 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
Series B Cumulative Preferred Stock or 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). The
provisions of this Section 3(b) will not apply to any grant, issuance or sale of
Common Stock Equivalents or other rights to purchase stock, warrants, securities
or other property of the Company which is not made pro rata to the record
holders of any class of shares of Series B Cumulative Preferred Stock or Common
Stock.

 

 

 

 

(c) 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 stockholders of the
Company 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 capital stock of the Company, (iv) the Company, directly or
indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Series B Cumulative Preferred Stock or
Common Stock or any compulsory share exchange pursuant to which the Series B
Cumulative Preferred Stock or Common Stock is 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 capital stock of the Company (not
including any shares of capital 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 Security
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 Series B
Cumulative Preferred Stock and Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and any
additional consideration (the “Alternate Consideration”) receivable as a result
of such Fundamental Transaction by a holder of the number of shares of shares of
Series B Cumulative Preferred Stock and 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 Series B
cumulative Preferred Stock and 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 capital
stock of the Company 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 after such Fundamental Transaction. Notwithstanding anything to the
contrary, in the event of a Fundamental Transaction that is (1) an all cash
transaction, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the
Exchange Act, or (3) a Fundamental Transaction involving a person or entity not
traded on a national securities exchange, including, but not limited to, the
NYSE:MKT, the Nasdaq Global Select Market, the Nasdaq Global Market, or the
Nasdaq Capital Market, the Company or any Successor Entity (as defined below)
shall, at the option of the Holder or the Company or any Successor Entity,
exercisable at any time concurrently with, or within 30 days after, the
consummation of the 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. “Black Scholes Value” means the
value of this Warrant based on the Black Scholes Option Pricing Model obtained
from the “OV” function on 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 Fundamental Transaction, (C) the underlying price
per share used in such calculation shall be 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 (D) a remaining option time
equal to the time between the date of the public announcement of the applicable
Fundamental Transaction and the Termination Date. 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(c), and to deliver to the Holder in exchange for this Warrant a security of
the Successor Entity evidenced by a written instrument substantially similar in
form and substance to this Warrant which is exercisable for a corresponding
number of shares of capital stock of such Successor Entity (or its parent
entity) equivalent to the securities acquirable and receivable upon exercise of
this Warrant (without regard to any limitations on the exercise of this Warrant)
before such Fundamental Transaction, and with an exercise price which applies
the exercise price hereunder to such shares of capital stock (but taking into
account the relative value of the shares of Series B Cumulative Preferred Stock
and Common Stock pursuant to such Fundamental Transaction and the value of such
shares of capital stock, such number of shares of capital stock and such
exercise price being for the purpose of protecting the economic value of this
Warrant immediately prior to the consummation of 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 this Warrant and the other
Transaction Documents 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 this Warrant and the
other Transaction Documents with the same effect as if such Successor Entity had
been named as the Company herein.

 

 

 

 

(d) 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.

 

(e) 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 mail to
the Holder a notice setting forth the Exercise Price after such adjustment and
any resulting adjustment to the number of Units 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 Series B Cumulative
Preferred Stock or Common Stock, (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Series B Cumulative
Preferred Stock or 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 Series B Cumulative Preferred Stock or 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 Series B Cumulative Preferred Stock or 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
mailed to the Holder at its last address as it shall appear upon the Warrant
Register (as defined in Section 4(c)) of the Company, at least 10 business days
before 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 Series B Cumulative Preferred
Stock or 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 Series B Cumulative Preferred Stock or Common Stock
of record shall be entitled to exchange their shares of Series B Cumulative
Preferred Stock or Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. To the extent that any notice
provided hereunder constitutes, or contains, material, non-public information
regarding the Company, the Company shall simultaneously file such notice with
the Commission pursuant to a Current Report on Form 8-K. 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 (including, without
limitation, any registration rights) 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 original Warrant shall promptly be cancelled. The Warrant, if properly
assigned in accordance herewith, may be exercised by a new holder for the
purchase of Warrant Units without having a new Warrant issued. Neither this
Warrant nor any Units (or shares of Series B Cumulative Preferred Stock and
Warrants comprising such Units) issued upon exercise of this Warrant shall be
sold, transferred, assigned, pledged, or hypothecated, or be the subject of any
hedging, short sale, derivative, put, or call transaction that would result in
the effective economic disposition of the securities by any person for a period
of 360 days immediately following the date of effectiveness or commencement of
sales of the Offering pursuant to which this Warrant is being issued, except the
transfer of any security:

 

 

 

 

(i) by operation of law or by reason of reorganization of the Company;

 

(ii) to any FINRA member firm participating in the Offering and the officers or
partners thereof, if all securities so transferred remain subject to the lock-up
restriction in this Section 4(a) for the remainder of the time period; or

 

(iii) the exercise or conversion of any security, if all securities received
remain subject to the lock-up restriction in this Section 4(a) for the remainder
of the time period.

 

(b) New Warrants. 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 initial issuance date of this Warrant and shall be identical with
this Warrant except as to the number of Units (or that number of shares of
Series B Cumulative Preferred Stock and Warrants comprising that number of
Units) issuable pursuant thereto.

 

(c) Warrant Register. The Company shall register this Warrant, upon records to
be maintained by the Company for that purpose (the “Warrant Register”), in the
name of the record Holder hereof from time to time. The Company 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. Piggyback Registration Rights. To the extent the Company does not
maintain an effective registration statement for the shares of Common Stock
underlying the warrants comprised in the Units and in the further event that the
Company files a registration statement with the Commission covering the sale of
its shares of Common Stock (other than a registration statement on Form S-4 or
S-8, or on another form, or in another context, in which such “piggyback”
registration would be inappropriate), then, for a period commencing on the
Initial Exercise Date and terminating on the fourth (4th) anniversary of the
Initial Exercise Date, the Company shall give written notice of such proposed
filing to the holders of Warrant Securities as soon as practicable but in no
event less than ten (10) business days before the anticipated filing date, which
notice shall describe the amount and type of securities to be included in such
offering, the intended method(s) of distribution, and the name of the proposed
managing underwriter or underwriters, if any, of the offering, and offer to the
holders of Warrant Securities in such notice the opportunity to register the
sale of such number of shares of shares of Common Stock underlying the warrants
comprised in the Units as such holders may request in writing within five (5)
business days after receipt of such notice (a “Piggyback Registration”). The
Company shall cause such shares of Common Stock underlying the warrants
comprised in the Units to be included in such registration and shall use its
best efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering to permit the shares of Common Stock underlying the
warrants comprised in the Units requested to be included in a Piggyback
Registration on the same terms and conditions as any similar securities of the
Company and to permit the sale or other disposition of such shares of Common
Stock underlying the warrants comprised in the Units in accordance with the
intended method(s) of distribution thereof. All holders of shares of Common
Stock underlying the warrants comprised in the Units proposing to distribute
their securities through a Piggyback Registration that involves an underwriter
or underwriters shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such Piggyback Registration.

 

Section 6. Miscellaneous.

 

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

 

 

 

 

(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 or warrant relating to the Warrant Securities, and in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it
(which, in the case of the Warrant, shall not include the posting of any bond),
and upon surrender and cancellation of such Warrant, stock certificate or
warrant, if mutilated, the Company will make and deliver a new Warrant, stock
certificate or warrant of like tenor and dated as of such cancellation, in lieu
of such Warrant, stock certificate or warrant.

 

(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 Series B
Cumulative Preferred Stock and Common Stock a sufficient number of shares to
provide for the issuance of the Warrant Securities upon the exercise of any
purchase rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary Warrant Securities upon the exercise of the purchase rights under this
Warrant. The Company will take all such commercially reasonable action as may be
necessary to assure that such Warrant Securities may be issued as provided
herein without violation of any applicable law or regulation, or of any
requirements of the Trading Market. The Company covenants that all Warrant
Securities 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 Securities in
accordance herewith and therewith, be duly authorized, validly issued, fully
paid and nonassessable 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).

 

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 the 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 the Series B
Cumulative Preferred Stock or Common Stock 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 nonassessable Warrant Securities 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
Units (or that number of shares of Series B Cumulative Preferred Stock and
Warrants comprising that number of Units) for which this Warrant is exercisable
or in the Exercise Price, the Company shall obtain all such authorizations or
exemptions therefor, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.

 

(e) Jurisdiction. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be determined in accordance
with the internal laws of the State of New York, without regard to conflict of
laws principles, and federal or state courts sitting in the City of New York,
State of New York shall have exclusive jurisdiction over matters arising out of
this Warrant.

 

(f) Restrictions. The Holder acknowledges that the Units (or the shares of
Series B Cumulative Preferred Stock and Warrants comprising the Units) acquired
upon the exercise of this Warrant, if not registered, 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 or the Agreement, 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 and all 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 notice, request or other document required or permitted to be
given or delivered to the Holder by the Company shall be delivered to the Holder
at its last address as it shall appear upon the Warrant Register.

 

(i) Limitation of Liability. No provision hereof, in the absence of any
affirmative action by the Holder to exercise this Warrant to purchase Units (or
the shares of Series B Cumulative Preferred Stock and Warrants comprising the
Units), 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
Unit or as a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.

 

(j) 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 alone 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.

 

(k) 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 Securities.

 

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

 

(m) 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.

 

(n) 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]

 

 

 

 

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: Andrew Wiederhorn   Title: Chief
Executive Officer       [CORPORATE SEAL]           ATTEST:           Secretary  
 

 

 

 

 

NOTICE OF EXERCISE

 

TO: FAT BRANDS INC.

 

(1) The undersigned hereby elects to purchase ________ Units (or that number of
shares of Series B Cumulative Preferred Stock and Warrants comprising that
number of Units) of the Company pursuant to the terms of the attached Warrant,
dated _______, 2019, 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 by wire transfer or cashier’s check
drawn on a United States bank; or

 

[  ] if permitted by the terms of the Warrant, 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 pursuant to the cashless exercise
procedure set forth in subsection 2(c).

 

(3) Please issue said Units (or that number of shares of Series B Cumulative
Preferred Stock and Warrants comprising said Units) in the name of the
undersigned or in such other name as is specified below:

 

The Warrant Securities 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:  

 

 

 

 

ASSIGNMENT FORM

 

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

 

FOR VALUE RECEIVED, ____ all of or _______ shares of the foregoing Warrant and
all rights evidenced thereby are hereby assigned to

 

whose address is:

 

Date: ______________, _______

 

Holder’s Signature:

 

Holder’s Address:

 

Signature Guaranteed:

 

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