WARRANT AGENCY AGREEMENT

 

THIS WARRANT AGENCY AGREEMENT (this “Agreement”) is made as of October 3, 2019
(the “Issuance Date”), by and between FAT Brands Inc., a Delaware corporation
(the “Company”), and VStock Transfer, LLC a California limited liability company
(the “Warrant Agent”).

 

WHEREAS, the Company intends to offer and sell up to 1,200,000 shares of its
Series B Cumulative Preferred Stock, par value $0.0001 per share (“Series B
Preferred Stock”), and warrants to purchase up to 720,000 shares of its common
stock, par value $0.0001 per share (“Common Stock” or “Warrant Shares”), subject
to adjustment as described herein (each, a “Warrant” and, collectively,
“Warrants”), pursuant to a Selling Agency Agreement between the Company and each
of Tripoint Global Equities, LLC and Digital Offering, LLC (the “Selling Agency
Agreement”);

 

WHEREAS, the Series B Preferred Stock and Warrants will be issued by the Company
in a public offering pursuant to an Offering Statement on Form 1-A filed with
the Securities and Exchange Commission (the “Commission”) under the Securities
Act of 1933, as amended (the “Act”), and a related Offering Circular;

 

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

 

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

 

WHEREAS, all acts and things have been done and performed which are necessary to
make the Warrants, when executed on behalf of the Company and countersigned by
or on behalf of the Warrant Agent, as provided herein, the valid, binding and
legal obligations of the Company, and to authorize the execution and delivery of
this Agreement.

 

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

 

1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent
to act as agent for the Company for the Warrants, and the Warrant Agent hereby
accepts such appointment and agrees to perform the same in accordance with the
express terms and conditions set forth in this Agreement.

 

2. Warrants.

 

2.1 Form of Warrant. Each Warrant shall be issued in registered form only, shall
be in substantially the form of Exhibit A hereto, the provisions of which are
incorporated herein, and shall be signed by, or bear the facsimile signature of,
the Chief Executive Officer, Chief Financial Officer, President or Secretary of
the Company (each an “Authorized Officer”). In the event the person whose
facsimile signature has been placed upon any Warrant shall have ceased to serve
in the capacity in which such person signed the Warrant before such Warrant is
issued, it may be issued with the same effect as if he or she had not ceased to
be such at the date of issuance.

 

2.2. Effect of Countersignature. Unless and until countersigned by the manual or
facsimile signature of the Warrant Agent pursuant to this Agreement, a Warrant
shall be invalid and of no effect and may not be exercised by the holder
thereof.

 

2.3. Registration.

 

2.3.1. Warrant Register. The Warrant Agent shall maintain books (the “Warrant
Register”) for the registration of original issuance and the registration of
transfer of the Warrants. Upon the initial issuance of the Warrants, the Warrant
Agent shall issue and register the Warrants in the names of the respective
holders thereof in such denominations and otherwise in accordance with the
written instructions delivered to the Warrant Agent by the Company. The Warrants
may be represented by definitive Warrant Certificates in physical form or by one
or more book-entry warrant certificates (the “Book-Entry Warrant Certificates”)
deposited with the Depository Trust Company (the “Depository”) and registered in
the name of Cede & Co., a nominee of the Depository. Definitive Warrant
Certificates shall be in substantially the form annexed hereto as Exhibit A.
Ownership of beneficial interests in the Book-Entry Warrant Certificates shall
be shown on, and the transfer of such ownership shall be effected through,
records maintained (i) by the Depository or its nominee for each Book-Entry
Warrant Certificate; (ii) by institutions that have accounts with the Depository
(such institution, with respect to a Warrant in its account, a “Participant”);
or (iii) directly on the book-entry records of the Warrant Agent with respect
only to owners of beneficial interests that request such direct registration. As
used herein, if a Warrant is in book-entry form, a “holder” or “registered
holder” shall also include within its meaning a Participant or a designee of a
Participant.

 

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If the Depository subsequently ceases to make its book-entry settlement system
available for the Warrants, the Company may instruct the Warrant Agent regarding
making other arrangements for book-entry settlement within ten (10) days after
the Depository ceases to make its book-entry settlement available. In the event
that the Company does not make alternative arrangements for book-entry
settlement within ten (10) days or the Warrants are not eligible for, or it is
no longer necessary to have the Warrants available in, book-entry form, the
Warrant Agent shall provide written instructions to the Depository to deliver to
the Warrant Agent for cancellation each Book-Entry Warrant Certificate, and the
Company shall instruct the Warrant Agent, in writing, to deliver to the
Depository definitive Warrant Certificates in physical form evidencing such
Warrants.

 

2.3.2. Beneficial Owner; Registered Holder. The term “beneficial owner” shall
mean any person in whose name ownership of a beneficial interest in the Warrants
evidenced by (a) a Book-Entry Warrant Certificate is recorded in the records
maintained by the Depository or its nominee or (b) a definitive Warrant
Certificate is recorded in the book-entry records of the Warrant Agent. Prior to
due presentment for registration of transfer of any Warrant, the Company and the
Warrant Agent may deem and treat the person in whose name such Warrant shall be
registered in the Warrant Register (“registered holder”), as the absolute owner
of such Warrant and of each Warrant represented thereby (notwithstanding any
notation of ownership or other writing on the Warrant Certificate made by anyone
other than the Company or the Warrant Agent), for the purpose of any exercise
thereof, and for all other purposes, and neither the Company nor the Warrant
Agent shall be affected by any notice to the contrary.

 

2.4. Detachability of Warrants. The Series B Preferred Stock and the Warrants
will be issued separately and will be separately transferable immediately upon
issuance.

 

3. Terms and Exercise of Warrants.

 

3.1. Exercise Price. The exercise price per whole share of Common Stock under
each Warrant shall be $8.50, subject to adjustment hereunder (the “Exercise
Price”).

 

3.2. Duration of Warrants. A Warrant may be exercised only during the period
(the “Exercise Period”) commencing on the Issuance Date and terminating at 5:00
P.M., Eastern time on October 3, 2024 (the “Expiration Date”). Each Warrant not
exercised on or before the Expiration Date shall become void, and all rights
thereunder and all rights in respect thereof under this Agreement shall cease at
the close of business on the Expiration Date.

 

3.3. Exercise of Warrants.

 

3.3.1. Exercise and Payment. A registered holder may exercise a Warrant by
delivering, not later than 5:00 P.M., Eastern time, on any Business Day during
the Exercise Period (the “Exercise Date”) to the Warrant Agent at its offices
designated for such purpose (i) the Warrant Certificate evidencing the Warrants
to be exercised, or, in the case of a Book-Entry Warrant Certificate, the
Warrants to be exercised (the “Book-Entry Warrants”) free on the records of the
Depository to an account of the Warrant Agent at the Depository designated for
such purpose in writing by the Warrant Agent to the Depository from time to
time, and (ii) an election to purchase the Warrant Shares underlying the
Warrants to be exercised (the “Election to Purchase” and together with the
Warrant Certificates and the Book-Entry Warrants, the “Warrant Exercise
Documents”), properly completed and duly executed by the registered holder on
the reverse of the Warrant Certificate, accompanied by a signature guarantee (if
requested by the Warrant Agent) and such other documentation as the Warrant
Agent may reasonably request, or, in the case of a Book-Entry Warrant
Certificate, properly delivered by the Participant in accordance with the
Depository’s procedures. Within one Business Day after the Exercise Date, such
holder must pay the Warrant Price for each Warrant to be exercised in lawful
money of the United States of America by wire, certified or official bank check,
or wire transfer, in immediately available funds. The term “Warrant Price” as
used in this Agreement refers to price per share of Common Stock at which shares
may be purchased at the time the Warrant is exercised.

 

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If any of (A) the Warrant Certificate or the Book-Entry Warrants, or (B) the
Election to Purchase is received by the Warrant Agent after 5:00 P.M., Eastern
time, on the specified Exercise Date, the Warrants will be deemed to be received
on the Business Day next succeeding the Exercise Date. If the date specified as
the Exercise Date is not a Business Day, the Warrants will be deemed to be
received on the next succeeding day that is a Business Day. If the Warrants are
received or deemed to be received after the Expiration Date, the exercise
thereof will be null and void and any funds delivered to the Warrant Agent will
be returned to the registered holder or Participant, as the case may be, as soon
as practicable. In no event will interest accrue on funds deposited with the
Warrant Agent in respect of an exercise or attempted exercise of Warrants. The
Warrant Agent shall not have any responsibility or liability relating to the
determination as to the validity of any exercise of Warrants which determination
will be made by the Company and the applicable registered holder, and the
Warrant Agent may rely upon the instructions of the Company regarding the
validity of any exercise of Warrants. The Warrant Agent shall not have any
obligation to inform a registered holder of the invalidity of any exercise of
Warrants. If the Company believes that an exercise by a registered holder is
invalid the Company will promptly notify such registered holder of the such fact
and the reasons why it believes the exercise was invalid and will provide a copy
of such notice to the Warrant Agent as soon as practicable .

 

The Warrant Agent shall, promptly after Warrant Shares are issued, forward funds
received for warrant exercises by wire transfer to an account designated by the
Company in writing.

 

All funds received by The Warrant Agent under this Agreement that are to be
distributed or applied by the Warrant Agent in the performance of services (the
“Funds”) shall be held by the Warrant Agent as agent for the Company and
deposited in one or more bank accounts to be maintained by the Warrant Agent in
its name as agent for the Company. Until paid pursuant to the terms of this
Agreement, the Warrant Agent will hold the Funds through such accounts in:
deposit accounts of commercial banks with Tier 1 capital exceeding $1 billion or
with an average rating above investment grade by Standard and Poor’s Corporation
(LT Local Issuer Credit Rating), Moody’s Investors Service, Inc. (Long Term
Rating) and Fitch Ratings, Inc. (LT Issuer Default Rating) (each as reported by
Bloomberg Finance L.P.). the Warrant Agent shall have no responsibility or
liability for any diminution of the Funds that may result from any deposit made
by the Warrant Agent in accordance with this paragraph, including any losses
resulting from a default by any bank, financial institution or other third
party.

 

3.3.2. Issuance of Certificates. The Warrant Agent shall, within a reasonable
time, advise the Company and the Company’s transfer agent and registrar (if
different than the Warrant Agent) in respect of (a) the Warrant Shares issuable
upon such exercise as to the number of Warrants exercised in accordance with the
terms and conditions of this Agreement, (b) the instructions of each registered
holder or Participant, as the case may be, with respect to delivery of the
Warrant Shares issuable upon such exercise, and the delivery of definitive
Warrant Certificates, as appropriate, evidencing the balance, if any, of the
Warrants remaining after such exercise, (c) in case of a Book-Entry Warrant
Certificate, the notation that shall be made to the records maintained by the
Depository, its nominee for each Book-Entry Warrant Certificate, or a
Participant, as appropriate, evidencing the balance, if any, of the Warrants
remaining after such exercise and (d) such other information as the Company, the
Warrant Agent or such transfer agent and registrar shall reasonably require.

 

The Warrant Agent shall, by 5:00 P.M., Eastern time, on the date that is three
(3) Trading Days after the delivery to the Warrant Agent of the Notice of
Exercise (such date, the “Warrant Share Delivery Date”), execute, issue and
deliver, on the Company’s behalf, the Warrant Shares to which such registered
holder or Participant, as the case may be, is entitled, in fully registered
form, registered in such name or names as may be directed by such registered
holder or the Participant, as the case may be.

 

In lieu of delivering physical certificates representing the Warrant Shares
issuable upon exercise, provided the Company’s transfer agent is participating
in the Depository’s Fast Automated Securities Transfer program, the Company
shall use its reasonable best efforts to cause its transfer agent to
electronically transmit the Warrant Shares issuable upon exercise to the
Depository’s Fast Automated Securities Transfer program. While any Warrants
remain outstanding, the Company shall maintain a transfer agent that
participates in the Depository’s Fast Automated Securities Transfer program (or
any successor to such program).

 

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If the Warrant Agent or the Company’s transfer agent, as applicable, fails to
comply with the preceding paragraphs in this Section 3.3.2 by the Warrant Share
Delivery Date, then, in addition to other rights it may have hereunder, the
registered holder or Participant will have the right to rescind its exercise.

 

3.3.3. Valid Issuance. All shares of Common Stock issued upon the proper
exercise of a Warrant in conformity with this Agreement shall be validly issued,
fully paid and nonassessable.

 

3.3.4. Dividends. The accrual of dividends, if any, on the Warrant Shares issued
hereunder will be governed by the terms generally applicable to the Common
Stock. From and after the issuance of such Warrant Shares, the former holder of
the Warrants exercised will be entitled to the benefits generally available to
other holders of Common Stock, including the accrual of dividends, if any, on
such Warrant Shares even prior to exercise of such Warrant Shares, and such
former holder’s right to receive payments of dividends and any other amounts
payable in respect of the Warrant Shares shall be governed by, and shall be
subject to, the terms and provisions generally applicable to the Common Stock.

 

3.3.5 No Fractional Exercise. A registered holder may exercise a Warrant from
time to time only for whole shares of Common Stock. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of a
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. If fewer than all of the Warrants evidenced by a Warrant
Certificate are exercised, a new Warrant Certificate for the number of
unexercised Warrants remaining shall be executed by the Company and
countersigned by the Warrant Agent as provided in Section 2 of this Agreement,
and delivered to the holder of the Warrant Certificate at the address specified
on the books of the Warrant Agent or as otherwise specified in writing by such
registered holder. If fewer than all the Warrants evidenced by a Book-Entry
Warrant Certificate are exercised, a notation shall be made to the records
maintained by the Depository, its nominee for each Book-Entry Warrant
Certificate, or a Participant, as appropriate, evidencing the balance of the
Warrants remaining after such exercise.

 

Whenever a payment for fractional shares is to be made by the Warrant Agent
under this Agreement, the Company shall promptly prepare and deliver to the
Warrant Agent a certificate setting forth in reasonable detail the facts related
to such payments and the prices and formulas utilized in calculating such
payments. The Warrant Agent shall be fully protected in relying upon such a
certificate and shall have no duty with respect to, and shall not be deemed to
have knowledge of, any payment for fractional shares under this Agreement
relating to the payment of fractional shares unless and until the Warrant Agent
shall have received such a certificate and sufficient monies. The Company shall
provide an initial funding of one thousand dollars ($1,000) for the purpose of
issuing cash in lieu of fractional shares. From time to time thereafter, the
Warrant Agent may request additional funding to cover payments for fractional
Warrant Shares. The Warrant Agent shall have no obligation to make such payments
for fractional Warrant Shares unless the Company shall have provided the
necessary funds to pay in full all amounts due and payable with respect thereto.
Upon expiration of the term of all Warrants or the earlier exercise of all
Warrants any balance remaining of such funds shall be paid to the Company.

 

3.3.6 No Transfer Taxes. Issuance of Warrant Shares shall be made without charge
to a registered holder for any issue or transfer tax or other incidental expense
in respect of the issuance of such Warrant Shares, all of which taxes and
expenses shall be paid by the Company, and such Warrant Shares shall be issued
in the name of the registered holder or in such name or names as may be directed
by the registered holder; provided, however, that in the event Warrant Shares
are to be issued in a name other than the name of the registered holder, a
Warrant when surrendered for exercise shall be accompanied by the Assignment
Form attached hereto duly executed by the registered 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 exercise notice. The Warrant
Agent shall not have any duty or obligation to take any action under any section
of this Agreement that requires the payment of taxes and/or charges unless and
until it is satisfied that all such payments have been made.

 

3.3.7 Date of Issuance. Each person in whose name any such certificate for
shares of Common Stock is issued shall for all purposes be deemed to have become
the holder of record of such shares on the date on which the Warrant was
surrendered and payment of the Warrant Price was made, irrespective of the date
of delivery of such certificate, except that, if the date of such surrender and
payment is a date when the stock transfer books of the Company are closed, such
person shall be deemed to have become the holder of such shares at the close of
business on the next succeeding date on which the stock transfer books are open.
Upon receipt by the Company of a duly executed Notice of Exercise (which may be
by facsimile or email), a registered holder shall be deemed to have exercised
its Warrant as specified in the Notice of Exercise for purposes of Regulation
SHO promulgated under the Securities Exchange Act of 1934, as amended.

 

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3.3.8 Optional Cashless Exercise. If at any time during the term of this
Agreement there is no effective registration statement registering, or no
current prospectus available for, the issuance or resale of the Warrant Shares
by the registered holder, then the Warrant may also be exercised, in whole or in
part, at such time by means of a “cashless exercise” in which the holder shall
be entitled to receive a number of Warrant Shares equal to the quotient 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 exercise notice;

 

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

 

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

 

“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market (as defined below), the daily volume weighted average price of
the Common Stock for such date (or the nearest preceding date) on the Trading
Market on which the Common Stock is then listed or quoted as reported by
Bloomberg L.P. (“Bloomberg”) (based on a Trading Day from 9:30 a.m. (New York
City time) to 4:02 p.m. (New York City time)), (b) if the OTC Bulletin Board is
not a Trading Market, the volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the
Common Stock is not then listed or quoted for trading on the OTC Bulletin Board
and if prices for the Common Stock are then reported in the “Pink Sheets”
published by OTC Markets, Inc. (or a similar organization or agency succeeding
to its functions of reporting prices), the most recent bid price per share of
the Common Stock so reported, or (d) in all other cases, the fair market value
of a share of Common Stock as determined by an independent appraiser selected in
good faith by the Company and reasonably acceptable to the holders of a majority
in interest of the total number of Warrants issued under the Selling Agency
Agreement then outstanding, the fees and expenses of which shall be paid by the
Company.

 

“Trading Day” means a day on which the principal Trading Market is open for
trading.

 

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

 

Upon receipt of an Election to Purchase for a cashless exercise, the Company
shall calculate and transmit to the Warrant Agent, and the Warrant Agent shall
have no obligation under this Agreement to calculate, the Cashless Exercise
Ratio. The number of shares of Common Stock to be issued on such exercise will
be determined by the Company (with written notice thereof to the Warrant Agent)
using the formula set forth in this Section 3.3.8, the Warrant Agent shall have
no duty or obligation to investigate or confirm whether the Company’s
determination of the number of shares of Common Stock to be issued on such
exercise, pursuant to this Section 3.3.8 is accurate or correct.

 

3.3.9 Disputes. In the case of a dispute as to the determination of the Exercise
Price or the arithmetic calculation of the Warrant Shares, the Company shall
promptly issue to the registered holder the number of Warrant Shares that are
not disputed.

 

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3.3.10 Limitations on Exercise. A registered holder shall not have the right to
exercise any portion of the Warrant to the extent that after giving effect to
such issuance after exercise as set forth on the applicable exercise notice, the
registered holder (together with the registered holder’s affiliates, and any
other persons acting as a group together with the registered holder or any of
the registered holder’s affiliates (collectively, such registered 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 Common Stock beneficially owned by the registered holder and
its affiliates shall include the number of shares of Common Stock issuable upon
exercise of the Warrant with respect to which such determination is being made,
but shall exclude the number of shares of Common Stock which would be issuable
upon (i) exercise of the remaining, nonexercised portion of the Warrant
beneficially owned by the registered holder or any of its affiliates and (ii)
exercise or conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other Common Stock
equivalents) subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the registered holder or any
of its affiliates. Except as set forth in the preceding sentence, for purposes
of this Section 3.3.10, beneficial ownership shall be calculated in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) and the rules and regulations promulgated thereunder, it being
acknowledged by the registered holder that the Company is not representing to
the registered holder that such calculation is in compliance with Section 13(d)
of the Exchange Act and the registered holder is solely responsible for any
schedules required to be filed in accordance therewith. To the extent that the
limitation contained in this Section 3.3.10 applies, the determination of
whether the Warrant is exercisable (in relation to other securities owned by the
registered holder together with any affiliates) and of which portion of the
Warrant is exercisable shall be in the sole discretion of the registered holder,
and the submission of an exercise notice shall be deemed to be the registered
holder’s determination of whether the Warrant is exercisable (in relation to
other securities owned by the registered holder together with any affiliates)
and of which portion of the Warrant is exercisable, in each case subject to the
Beneficial Ownership Limitation, and Warrant Agent and the Company shall have no
obligation to verify or confirm the accuracy of such determination. In addition,
a determination as to any group status as contemplated above shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this Section 3.3.10, in
determining the number of outstanding shares of Common Stock, a registered
holder may rely on the number of outstanding shares of Common Stock as reflected
in (A) the Company’s most recent periodic or annual report filed with the
Commission, as the case may be, (B) a more recent public announcement by the
Company or (C) a more recent written notice by the Company or the transfer agent
setting forth the number of shares of Common Stock outstanding. Upon the written
or oral request of a registered holder, the Company shall within two Trading
Days confirm orally and in writing to the registered holder the number of shares
of Common Stock then outstanding as established by (A), (B) or (C) above, as
applicable. In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or exercise of securities of
the Company, including the Warrant, by the registered holder or its affiliates
since the date as of which such number of outstanding shares of Common Stock was
reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon exercise of the Warrant. The
registered holder, upon not less than 61 days’ prior notice to the Company, may
increase the Beneficial Ownership Limitation provisions of this Section 3.3.10,
provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of
the number of shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of the Warrant
held by the registered holder and the provisions of this Section 3.3.10 shall
continue to apply. Any such increase will not be effective until the 61st day
after such notice is delivered to the Company and shall only be effective with
respect to such registered holder. The provisions of this paragraph shall be
construed and implemented in a manner otherwise than in strict conformity with
the terms of this Section 3.3.10 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 the
Warrant.

 

3.4. Cost Basis Information. (a) In the event of a cash exercise, the Company
hereby instructs the Warrant Agent to record cost basis for newly issued shares
in a manner to be subsequently communicated by the Company in writing to the
Warrant Agent.

 

(b) In the event of a cashless exercise, the Company shall provide cost basis
for shares issued pursuant to a cashless exercise at the time the Company
confirms the number of Warrant Shares issuable in connection with the cashless
exercise to the Warrant Agent pursuant to Section 3.3.3 hereof.

 

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3.5. Rule 144. (a) If the Warrant Shares are issued in a cashless exercise, the
Company and the registered holder undertaking such cashless exercise acknowledge
and agree that in accordance with Section 3(a)(9) of the Act, other than a
change in law, the Warrant Shares take on the registered characteristics of the
Warrants being exercised. For purposes of Rule 144(d) promulgated under the Act,
as in effect on the Issuance Date, it is intended that the Warrant Shares issued
in a cashless exercise shall be deemed to have been acquired by the holder of
the Warrant Shares, and the holding period for the Warrant Shares shall be
deemed to have commenced, on the date the Warrants being exercised were
originally issued pursuant to the Selling Agency Agreement.

 

(b) The Company shall, at all times prior to the earlier to occur of (i) the
date of sale or other disposition by the holders of a Warrant of or all shares
of Common Stock issued on exercise of such Warrant or (ii) the expiration or
earlier termination of a Warrant if a Warrant has not been exercised in full or
in part on such date, use commercially reasonable efforts to timely file all
reports required under the Exchange Act and otherwise timely take all actions
necessary to permit the holder of such Warrant and/or the shares of Common Stock
issued on exercise thereof to sell or otherwise dispose of such Warrant and
shares pursuant to Rule 144 promulgated under the Act, provided that the
foregoing shall not apply in the event of a Merger Event following which the
successor or surviving entity is not subject to the reporting requirements of
the Exchange Act. If the holder of a Warrant proposes to sell Common Stock
issuable upon the exercise of such Warrant in compliance with Rule 144, then,
upon the holder of the Warrant’s written request to the Company, the Company
shall furnish to the holder of the Warrant, within five (5) Business Days after
receipt of such request, a written statement confirming the Company’s compliance
with the filing and other requirements of such Rule 144.

 

4. Adjustments.

 

4.1. Stock Dividends and Splits. If the Company, at any time while a Warrant is
outstanding: (i) pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the Company upon
exercise of a Warrant), (ii) subdivides outstanding shares of Common Stock into
a larger number of shares, (iii) combines (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of shares, or
(iv) issues by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding immediately before
such event and of which the denominator shall be the number of shares of Common
Stock outstanding immediately after such event, and the number of shares
issuable upon exercise of a Warrant shall be proportionately adjusted such that
the aggregate Exercise Price of a Warrant shall remain unchanged. Any adjustment
made pursuant to this Section 2(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.

 

4.2. Subsequent Rights Offerings. If the Company, at any time while a Warrant is
outstanding, shall issue rights, options or warrants to all holders of Common
Stock (and not to the registered holders of the Warrants) entitling them to
subscribe for or purchase shares of Common Stock on the record date mentioned
below, then, the Exercise Price shall be multiplied by a fraction, of which the
denominator shall be the number of shares of the Common Stock outstanding on the
date of issuance of such rights, options or warrants plus the number of
additional shares of Common Stock offered for subscription or purchase, and of
which the numerator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights, options or warrants plus the
number of shares which the aggregate offering price of the total number of
shares so offered (assuming receipt by the Company in full of all consideration
payable upon exercise of such rights, options or warrants) would purchase at
VWAP (provided that the Exercise Price cannot increase). Such adjustment shall
be made whenever such rights, options or warrants are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants.

 

 7 

 

 

4.3. Fundamental Transaction. If, at any time while a 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
(other than a merger with a wholly-owned subsidiary of the Company for purposes
of offering a corporate name change), (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 holders of Common Stock are permitted to sell, tender or
exchange their shares for other securities, cash or property and has been
accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the
Company, directly or indirectly, in one or more related transactions effects any
reclassification, reorganization or recapitalization of the Common Stock or any
compulsory share exchange pursuant to which the 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 Common Stock (not
including any shares of Common Stock held by the other Person or other Persons
making or party to, or associated or affiliated with the other Persons making or
party to, such stock or share purchase agreement or other business combination)
(each a “Fundamental Transaction”), then, upon any subsequent exercise of a
Warrant, the registered holders each shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise immediately prior
to the occurrence of such Fundamental Transaction, at the option of each
registered holder (without regard to any limitation in Section 3.3.10 on the
exercise of a Warrant), the number of shares of Common Stock of the successor or
acquiring Person or of the Company, if it is the surviving Person, and any
additional consideration (the “Alternate Consideration”) receivable as a result
of such Fundamental Transaction by a holder of the number of shares of Common
Stock for which a Warrant is exercisable immediately prior to such Fundamental
Transaction (without regard to any limitation in Section 3.3.10 on the exercise
of a Warrant). For purposes of any such exercise, the determination of the
Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental Transaction,
then each registered holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of a Warrant following such
Fundamental Transaction.

 

4.4. Notices. Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 4, the Company shall give prompt written notice thereof to the
Warrant Agent, which notice shall set forth the Exercise Price after such
adjustment and set forth a brief statement of the facts requiring such
adjustment. The Company agrees that it will provide the Warrant Agent with any
new or amended exercise terms. The Warrant Agent shall have no obligation under
any Section of this Agreement to determine whether an adjustment made hereunder
has occurred or are scheduled or contemplated to occur or to calculate any of
the adjustments set forth in this Agreement.

 

4.5. Form of Warrant. The form of Warrant need not be changed because of any
adjustment pursuant to this Section 4, and Warrants issued after such adjustment
may state the same Warrant Price and the same number of shares as is stated in
the Warrants initially issued pursuant to this Agreement.

 

4.6. Calculations. All calculations under this Section 4 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 4, 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.

 

5. Transfer and Exchange of Warrants.

 

5.1. Registration of Transfer. The Warrant Agent shall register the transfer,
from time to time, of any outstanding Warrant upon the Warrant Register, upon
surrender of such Warrant for transfer, duly endorsed with signatures properly
guaranteed and accompanied by appropriate instructions for transfer. Upon any
such transfer, a new Warrant representing an equal aggregate number of Warrants
shall be issued and the old Warrant shall be cancelled by the Warrant Agent. The
Warrants so cancelled shall be delivered by the Warrant Agent to the Company
from time to time upon request.

 

5.2. Procedure for Surrender of Warrants. Warrants may be surrendered to the
Warrant Agent, together with a written request for exchange or transfer, and
thereupon the Warrant Agent shall issue in exchange therefor one or more new
Warrants as requested by the registered holder of the Warrants so surrendered,
representing an equal aggregate number of Warrants; provided, however, that
except as otherwise provided herein or in any Book-Entry Warrant Certificate,
each Book-Entry Warrant Certificate may be transferred only in whole and only to
the Depository, to another nominee of the Depository, to a successor depository,
or to a nominee of a successor depository; provided further, however, that in
the event that a Warrant surrendered for transfer bears a restrictive legend,
the Warrant Agent shall not cancel such Warrant and issue new Warrants in
exchange therefor until the Warrant Agent has received an opinion of counsel for
the Company stating that such transfer may be made and indicating whether the
new Warrants or Warrant Shares must also bear a restrictive legend. Upon any
such registration of transfer, the Company shall execute, and the Warrant Agent
shall countersign and deliver, in the name of the designated transferee a new
Warrant Certificate or Warrant Certificates of any authorized denomination
evidencing in the aggregate a like number of unexercised Warrants.

 

 8 

 

 

A party requesting transfer of Warrants must provide any evidence of authority
that may be required by the Warrant Agent, including but not limited to, a
signature guarantee from an eligible guarantor institution participating in a
signature guarantee program approved by the Securities Transfer Association.

 

5.3. Fractional Warrants. The Warrant Agent shall not be required to effect any
registration of transfer or exchange which will result in the issuance of a
warrant certificate for a fraction of a warrant.

 

5.4. Service Charges. No service charge shall be charged against the holder or
transferee for any exchange or registration of transfer of Warrants.

 

5.5. Warrant Execution and Countersignature. The Warrant Agent is hereby
authorized to countersign and to deliver, in accordance with the terms of this
Agreement, the Warrants required to be issued pursuant to the provisions of this
Section 5, and the Company, whenever required by the Warrant Agent, will supply
the Warrant Agent with Warrants duly executed on behalf of the Company for such
purpose.

 

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

 

6.1. No Rights as Stockholder. Except as otherwise specifically provided herein,
a registered holder, solely in its capacity as a holder of a Warrant, shall not
be entitled to vote or receive dividends or be deemed the holder of share
capital of the Company for any purpose, nor shall anything contained in this
Agreement be construed to confer upon a registered holder, solely in its
capacity as the registered holder of a Warrant, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the registered holder of the Warrant Shares which it is then
entitled to receive upon the due exercise of a Warrant. In addition, nothing
contained in this Agreement shall be construed as imposing any liabilities on a
registered holder to purchase any securities (upon exercise of a Warrant or
otherwise) or as a stockholder of the Company, whether such liabilities are
asserted by the Company or by creditors of the Company. A Warrant does not
entitle the registered holder thereof to any of the rights of a stockholder.

 

6.2. Lost, Stolen or Destroyed Warrants. The Warrant Agent shall issue
replacement Warrants in the same form for those certificates alleged to have
been lost, stolen or destroyed, upon receipt by Warrant Agent of an open penalty
surety bond satisfactory to it and holding it and Company harmless, absent
notice to Warrant Agent that such certificates have been acquired by a bona fide
purchaser. Warrant Agent may, at its option, issue replacement Warrants for
mutilated certificates upon presentation thereof without such indemnity.

 

6.3. Authorized Shares. The Company covenants that, during the period the
Warrants are outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the
Warrant Shares upon the exercise of any purchase rights under a Warrant. The
Company covenants that, if a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any purchase rights under a
Warrant are not available, it will use its best efforts to increase authorized
and unissued Common Stock to provide a sufficient number of such shares within
thirty (30) days. The Company further covenants that its issuance of the
Warrants shall constitute full authority to its officers who are charged with
the duty of executing stock certificates to execute and issue the necessary
Warrant Shares upon the exercise of the purchase rights under the Warrants. The
Company will take all such reasonable action as may be necessary to assure that
such Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Trading Market upon
which the Common Stock may be listed. The Company covenants that all Warrant
Shares which may be issued upon the exercise of the purchase rights represented
by a Warrant will, upon exercise of the purchase rights represented by a Warrant
and payment for such Warrant Shares in accordance herewith, 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).

 

 9 

 

 

Except and to the extent as waived or consented to by a registered 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 a 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 a registered holder as set
forth in this Agreement against impairment. Without limiting the generality of
the foregoing, the Company will (i) not increase the par value of any Warrant
Shares above the amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Warrant Shares upon the exercise of a 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 Agreement.
Before taking any action which would result in an adjustment in the number of
Warrant Shares for which a Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.

 

7. Concerning the Warrant Agent and Other Matters.

 

7.1. Payment of Taxes. The Company will from time to time promptly pay all taxes
and charges that may be imposed upon the Company or the Warrant Agent in respect
of the issuance, transfer or delivery of shares of Common Stock upon the
exercise of Warrants, but the Company or the Warrant Agent shall not be
obligated to pay any transfer taxes or charges in respect of the Warrants or
such shares in connection with a transfer to a different holder. The Warrant
Agent shall not register any transfer or issue or deliver any Warrant
Certificate(s) unless or until the persons requesting the registration or
issuance shall have paid to the Warrant Agent for the account of the Company the
amount of such transfer tax and charges, if any, or shall have established to
the reasonable satisfaction of the Company and the Warrant Agent that such
transfer tax and charges, if any, have been paid.

 

7.2. Resignation, Consolidation, or Merger of Warrant Agent.

 

7.2.1. Appointment of Successor Warrant Agent. The Warrant Agent, or any
successor to it hereafter appointed, may resign its duties and be discharged
from all further duties and liabilities hereunder after giving thirty (30) days’
notice in writing to the Company pursuant to the notice provisions in Section
8.2 hereof. In the event the transfer agency relationship, if any, in effect
between the Company and the Warrant Agent terminates, the Warrant Agent will be
deemed to have resigned automatically and be discharged from its duties under
this Agreement as of the effective date of such termination. If the office of
the Warrant Agent becomes vacant by resignation or incapacity to act or
otherwise, the Company shall appoint in writing a successor Warrant Agent in
place of the Warrant Agent. If the Company shall fail to make such appointment
within a period of 30 days after it has been notified in writing of such
resignation or incapacity by the Warrant Agent or by the holder of the Warrant
(who shall, with such notice, submit his Warrant for inspection by the Company),
then the holder of any Warrant may apply to the Supreme Court of the State of
New York for the County of New York for the appointment of a successor Warrant
Agent at the Company’s cost. Any successor Warrant Agent, whether appointed by
the Company or by such court, shall be authorized under applicable laws to
exercise the powers of a transfer agent and subject to supervision or
examination by federal or state authorities. After appointment, any successor
Warrant Agent shall be vested with all the authority, powers, rights,
immunities, duties, and obligations of its predecessor Warrant Agent with like
effect as if originally named as Warrant Agent hereunder, without any further
act or deed; but if for any reason it becomes necessary or appropriate, the
predecessor Warrant Agent shall execute and deliver, at the expense of the
Company, an instrument transferring to such successor Warrant Agent all the
authority, powers, and rights of such predecessor Warrant Agent hereunder; and
upon request of any successor Warrant Agent the Company shall make, execute,
acknowledge, and deliver any and all instruments in writing for more fully and
effectually vesting in and confirming to such successor Warrant Agent all such
authority, powers, rights, immunities, duties, and obligations.

 

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

 

 10 

 

 

7.2.3. Merger or Consolidation of Warrant Agent. Any Person into which the
Warrant Agent may be merged or converted or with which it may be consolidated or
any Person resulting from any merger, conversion, or consolidation to which the
Warrant Agent shall be a party, or any Person succeeding to the business of the
Warrant Agent, shall be the successor Warrant Agent under this Agreement without
any further act by the parties.

 

7.3. Fees and Expenses of Warrant Agent.

 

7.3.1. Remuneration. The Company agrees to pay the Warrant Agent reasonable
remuneration for its services as such Warrant Agent hereunder and will reimburse
the Warrant Agent upon demand for all expenditures (including the reasonable
expenses and fees of counsel) and disbursements that the Warrant Agent may
reasonably incur in the incurred in the preparation, delivery, negotiation,
amendment, administration and execution of this Agreement and the exercise and
performance of its duties hereunder.

 

7.3.2. Further Assurances. The Company shall perform, acknowledge and deliver or
cause to be performed, acknowledged and delivered all such further and other
acts, documents, instruments and assurances as may be reasonably required by the
Warrant Agent for the carrying out or performing by the Warrant Agent of the
provisions of this Agreement.

 

7.4. Liability of Warrant Agent.

 

7.4.1. Reliance on Company Statement. Whenever in the performance of its duties
under this Agreement, the Warrant Agent shall deem it necessary or desirable
that any fact or matter be proved or established by the Company prior to taking
or suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a statement signed by the Chief Executive
Officer, Chief Financial Officer, President or Chairman of the Board of
Directors of the Company and delivered to the Warrant Agent. The Warrant Agent
may rely upon, and be held harmless for such reliance, such statement for any
action taken or suffered, in the absence of bad faith, by it pursuant to the
provisions of this Agreement, and shall not be held liable in connection with
any delay in receiving such statement.

 

7.4.2. Indemnification. The Company covenants and agrees to indemnify and to
hold the Warrant Agent harmless against any costs, expenses (including
reasonable fees of its legal counsel), losses or damages, which may be paid,
incurred or suffered by or to which it may become subject, arising from or out
of, directly or indirectly, any claims or liability resulting from its actions
as Warrant Agent pursuant hereto; provided, that such covenant and agreement
does not extend to, and the Warrant Agent shall not be indemnified with respect
to, such costs, expenses, losses and damages incurred or suffered by the Warrant
Agent as a result of, or arising out of, its gross negligence, bad faith, or
willful misconduct (each as determined in a final, non-appealable judgment of a
court of competent jurisdiction).

 

7.4.3. Instructions. From time to time, the Company may provide the Warrant
Agent with instructions concerning the services performed by the Warrant Agent
hereunder. In addition, at any time the Warrant Agent may apply to any officer
of the Company for instruction, and may consult with legal counsel for Warrant
Agent or the Company with respect to any matter arising in connection with the
services to be performed by the Warrant Agent under this Agreement. The Warrant
Agent and its agents and subcontractors shall not be liable and shall be
indemnified by the Company for any action taken or omitted by the Warrant Agent
in reliance upon any Company instructions or upon the advice or opinion of such
counsel. The Warrant Agent shall not be held to have notice of any change of
authority of any person, until receipt of written notice thereof from the
Company.

 

7.4.4. Exclusions. The Warrant Agent shall have no responsibility with respect
to the validity of this Agreement or with respect to the validity or execution
of any Warrant (except its countersignature thereof); nor shall it be
responsible for any breach by the Company of any covenant or condition contained
in this Agreement or in any Warrant; nor shall it be responsible to make
calculations under Section 3.3.8 or any adjustments required under the
provisions of Section 4 hereof or responsible for the manner, method, or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment; nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation of any
shares of Common Stock to be issued pursuant to this Agreement or any Warrant or
as to whether any shares of Common Stock will when issued be valid and fully
paid and nonassessable.

 

 11 

 

 

7.4.5. Rights and Duties of Warrant Agent. (a) The Warrant Agent may consult
with legal counsel (who may be legal counsel for the Company), and the opinion
of such counsel shall be full and complete authorization and protection to the
Warrant Agent as to any action taken or omitted by it in accordance with such
opinion.

 

(b) The Warrant Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Warrant
Certificates (except its countersignature thereof) or be required to verify the
same, and all such statements and recitals are and shall be deemed to have been
made by the Company only.

 

(c) The Warrant Agent shall not have any duty or responsibility in the case of
the receipt of any written demand from any holder of Warrants with respect to
any action or default by the Company, including, without limiting the generality
of the foregoing, any duty or responsibility to initiate or attempt to initiate
any proceedings at law or otherwise or to make any demand upon the Company.

 

(d) The Warrant Agent and any stockholder, director, officer or employee of the
Warrant Agent may buy, sell or deal in any of the Warrants or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Warrant Agent under this
Agreement. Nothing herein shall preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.

 

(e) The Warrant Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorney or agents, and the Warrant Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorney or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, absent gross negligence, bad faith or willful misconduct
(each as determined by a final judgment of a court of competent jurisdiction) in
the selection and continued employment thereof.

 

(f) The Warrant Agent may rely on and shall be held harmless and protected and
shall incur no liability for or in respect of any action taken, suffered or
omitted to be taken by it in reliance upon any certificate, statement,
instrument, opinion, notice, letter, facsimile transmission, telegram or other
document, or any security delivered to it, and believed by it to be genuine and
to have been made or signed by the proper party or parties, or upon any written
or oral instructions or statements from the Company with respect to any matter
relating to its acting as Warrant Agent hereunder.

 

(g) The Warrant Agent shall not be obligated to expend or risk its own funds or
to take any action that it believes would expose or subject it to expense or
liability or to a risk of incurring expense or liability, unless it has been
furnished with assurances of repayment or indemnity satisfactory to it.

 

(h) The Warrant Agent shall not be liable or responsible for any failure of the
Company to comply with any of its obligations relating to any registration
statement filed with the Commission or this Agreement, including without
limitation obligations under applicable regulation or law.

 

(i) The Warrant Agent shall not be accountable or under any duty or
responsibility for the use by the Company of any Warrants authenticated by the
Warrant Agent and delivered by it to the Company pursuant to this Agreement or
for the application by the Company of the proceeds of the issue and sale, or
exercise, of the Warrants.

 

(j) The Warrant Agent shall act hereunder solely as agent for the Company, and
its duties shall be determined solely by the express provisions hereof (and no
duties or obligations shall be inferred or implied). The Warrant Agent shall not
assume any obligations or relationship of agency or trust with any of the owners
or holders of the Warrants.

 

(k) The Warrant Agent may rely on and be fully authorized and protected in
acting or failing to act upon (a) any guaranty of signature by an “eligible
guarantor institution” that is a member or participant in the Securities
Transfer Agents Medallion Program or other comparable “signature guarantee
program” or insurance program in addition to, or in substitution for, the
foregoing; or (b) any law, act, regulation or any interpretation of the same
even though such law, act, or regulation may thereafter have been altered,
changed, amended or repealed.

 

 12 

 

 

(l) In the event the Warrant Agent believes any ambiguity or uncertainty exists
hereunder or in any notice, instruction, direction, request or other
communication, paper or document received by the Warrant Agent hereunder, the
Warrant Agent, may, in its sole discretion, refrain from taking any action, and
shall be fully protected and shall not be liable in any way to Company, the
holder of any Warrant Certificate or Book-Entry Warrant Certificate or any other
person or entity for refraining from taking such action, unless the Warrant
Agent receives written instructions signed by the Company which eliminates such
ambiguity or uncertainty to the satisfaction of Warrant Agent. The foregoing
shall not eliminate any liability that the Company may have to any registered
holder or holder of any Warrant Certificate or Book-Entry Warrant Certificate.

 

7.6. Limitation on Liability of Warrant Agent. Notwithstanding anything
contained herein to the contrary, the Warrant Agent’s aggregate liability during
any term of this Agreement with respect to, arising from, or arising in
connection with this Agreement, or from all services provided or omitted to be
provided under this Agreement, whether in contract, or in tort, or otherwise, is
limited to, and shall not exceed, the amounts paid hereunder by the Company to
Warrant Agent as fees and charges, but not including reimbursable expenses,
during the twelve (12) months immediately preceding the event for which recovery
from Warrant Agent is being sought.

 

Sections 7.3, 7.4 and 7.6 shall survive the expiration of the Warrants, the
termination of this Agreement and the resignation, replacement or removal of the
Warrant Agent. The costs and expenses incurred in enforcing this right of
indemnification shall be paid by the Company.

 

7.5. Acceptance of Agency. The Warrant Agent hereby accepts the agency
established by this Agreement and agrees to perform the same upon the terms and
conditions herein set forth and among other things, shall account promptly to
the Company with respect to Warrants exercised and concurrently account for, and
pay to the Company, all moneys received by the Warrant Agent for the purchase of
shares of Common Stock through the exercise of Warrants.

 

7.7. Opinion of Counsel. The Company shall provide an opinion of counsel prior
to the Issuance Date to set up a reserve of Warrants and related Common Stock.
The opinion shall state that all Warrants or Common Stock, as applicable, are:

 

(1) registered under the Act, or are exempt from such registration, and all
appropriate state securities law filings have been made with respect to the
warrants or shares; and

 

(2) validly issued, fully paid and non-assessable.

 

8. Miscellaneous Provisions.

 

8.1. Successors. Subject to applicable securities laws, this Agreement and the
Warrants 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 each registered holder. The
provisions of this Agreement are intended to be for the benefit of any holder
from time to time of this Agreement and shall be enforceable by the holder or
holder of Warrant Shares.

 

8.2. Notices. Any notice, statement or demand authorized by this Agreement to be
given or made by the Warrant Agent or by the holder of any Warrant to or on the
Company shall delivered by hand or sent by registered or certified mail or
overnight courier service addressed (until another address is filed in writing
by the Company with the Warrant Agent), or by facsimile transmission (as long as
the sender maintains a fax delivery report confirming receipt by the recipient
and is considered delivered when sent or if after normal business hours the next
Business Day) or by email (as long as no bounce back is received by the sender),
as follows:

 

FAT Brands Inc.

9720 Wilshire Blvd., Suite 500

Beverly Hills, CA 90212

Attn: Corporate Secretary

Facsimile: (310) 319-1863

Email:

 

 13 

 

 

Any notice, statement or demand authorized by this Agreement to be given or made
by the holder of any Warrant or by the Company to or on the Warrant Agent shall
be delivered by hand or overnight courier service addressed (until another
address is filed in writing by the Warrant Agent with the Company) as follows:

 

VStock Transfer, LLC

18 Lafayette Place

Woodmere, NY 11598

Facsimile:

Email:

 

8.3. Jurisdiction. The validity, interpretation, and performance of this
Agreement and of the Warrants shall be governed in all respects by the laws of
the State of New York, without giving effect to conflicts of law principles that
would result in the application of the substantive laws of another jurisdiction.
The Company hereby agrees that any action, proceeding or claim against it
arising out of or relating in any way to this Agreement shall be brought and
enforced in the courts of the State of New York or the United States District
Court for the Southern District of New York, and irrevocably submits to such
jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives
any objection to such exclusive jurisdiction and that such courts represent an
inconvenience forum. Any such process or summons to be served upon the Company
may be served by transmitting a copy thereof by registered or certified mail,
return receipt requested, postage prepaid, addressed to it at the address set
forth in Section 8.2 hereof. Such mailing shall be deemed personal service and
shall be legal and binding upon the Company in any action, proceeding or claim.
Notwithstanding anything to the contrary contained herein, none of the foregoing
provisions of this Section 8.3 shall apply to or otherwise affect the
jurisdiction, venue or governing law of any actions arising under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or
any of the rules and regulations promulgated thereunder.

 

8.4. Persons Having Rights under this Agreement. Nothing in this Agreement
expressed and nothing that may be implied from any of the provisions hereof is
intended, or shall be construed, to confer upon, or give to, any person or
corporation other than the parties hereto and the registered holders of the
Warrants, any right, remedy, or claim under or by reason of this Agreement or of
any covenant, condition, stipulation, promise, or agreement hereof. All
covenants, conditions, stipulations, promises, and agreements contained in this
Agreement shall be for the sole and exclusive benefit of the parties hereto and
their successors and assigns and of the registered holders of the Warrants.

 

8.5. Examination of the Warrant Agency Agreement. A copy of this Agreement shall
be available at all reasonable times at the office of the Warrant Agent, for
inspection by the registered holder of any Warrant. The Warrant Agent may
require any such holder to submit his Warrant for inspection by it.

 

8.6. Counterparts. This Agreement may be executed in any number of original or
facsimile counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument. A signature to this Agreement transmitted
electronically shall have the same authority, effect, and enforceability as an
original signature.

 

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

 

8.8 Amendments. All modifications or amendments, including any amendment to
increase the Warrant Price or shorten the Exercise Period, shall require the
written consent of the registered holders of Warrants equal to at least 67% of
the Warrant Shares issuable upon exercise of all then outstanding Warrants. As a
condition precedent to the Warrant Agent’s execution of any amendment, the
Company shall deliver to the Warrant Agent a certificate from an Authorized
Officer that states that the proposed amendment is in compliance with the terms
of this Section 8.8. No consideration shall be offered or paid to any person to
amend or consent to a waiver or modification of any provision of this Agreement
unless the same consideration is also offered to all holders of the Warrants.
Notwithstanding anything in this Agreement to the contrary, the Warrant Agent
shall not be required to execute any supplement or amendment to this Agreement
that it has determined would adversely affect its own rights, duties,
obligations or immunities under this Agreement. No supplement or amendment to
this Agreement shall be effective unless duly executed by the Warrant Agent.

 

 14 

 

 

8.9 Severability. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Agreement; provided, however, that if such
prohibited and invalid provision shall adversely affect the rights, immunities,
liabilities, duties or obligations of the Warrant Agent, the Warrant Agent shall
be entitled to resign immediately upon written notice to the Company.

 

8.10 Restrictions. Each registered holder acknowledges that the Warrant Shares
acquired upon the exercise of a Warrant, if not registered, and the registered
holder does not utilize cashless exercise, will have restrictions upon resale
imposed by state and federal securities laws.

 

8.11. Nonwaiver and Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of a registered holder shall operate as
a waiver of such right or otherwise prejudice such a registered holder’s rights,
powers or remedies. Without limiting any other provision of this Agreement or
the Selling Agency Agreement, if the Company willfully and knowingly fails to
comply with any provision of this Agreement or the Warrants, which results in
any material damages to a registered holder, the Company shall pay such
registered holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys’ fees, including
those of appellate proceedings, incurred by the registered holder in collecting
any amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.

 

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

 

8.13. Remedies. The registered holders, 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 Agreement. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Agreement 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.

 

8.14. Confidentiality. The Warrant Agent and the Company agree that all books,
records, information and data pertaining to the business of the other party,
including inter alia, personal, non-public warrant holder information, which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement including the fees for services set forth in a mutually agreed upon
schedule shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law, including, without
limitation, pursuant to subpoenas from state or federal government authorities
(e.g., in divorce and criminal actions).

 

8.15. Consequential Damages. Neither party to this Agreement shall be liable to
the other party for any consequential, indirect, special or incidental damages
under any provisions of this Agreement or for any consequential, indirect,
punitive, special or incidental damages arising out of any act or failure to act
hereunder even if that party has been advised of or has foreseen the possibility
of such damages.

 

8.16 Force Majeure. Notwithstanding anything to the contrary contained herein,
the Warrant Agent will not be liable for any delays or failures in performance
resulting from acts beyond its reasonable control including, without limitation,
acts of God, terrorist acts, shortage of supply, breakdowns or malfunctions,
interruptions or malfunction of computer facilities, or loss of data due to
power failures or mechanical difficulties with information storage or retrieval
systems, labor difficulties, war, or civil unrest.

 

9. Certain Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:

 

9.1 “Business Day” means any day other than Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by law
or executive order to remain closed.

 

9.2 “Common Stock” means (i) the Company’s shares of Common Stock and (ii) any
share capital into which such Common Stock shall have been changed or any share
capital resulting from a reclassification of such Common Stock.

 

 15 

 

 

9.3 “Control” (including the terms “controlling”, “controlled by” or “under
common control with”) means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.

 

9.4 “Expiration Date” means the date that is the five-year anniversary of the
Issuance Date (or October 3, 2024) or, if such date falls on a day other than a
Business Day or on which trading does not take place on the Principal Market (a
“Holiday”), the next date that is not a Holiday, as the same may be extended
pursuant to Section 3.3.7.

 

9.5 “Merger Event” means any of the following: (i) a sale, lease or other
transfer of all or substantially all assets of the Company, (ii) any merger or
consolidation involving the Company in which the Company is not the surviving
entity or in which the outstanding shares of the Company’s capital stock are
otherwise converted into or exchanged for shares of capital stock or other
securities or property of another entity, or (iii) any sale by holders of the
outstanding voting equity securities of the Company in a single transaction or
series of related transactions of shares constituting a majority of the
outstanding combined voting power of the Company.

 

9.6 “Person” means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity and a government or any department or agency thereof.

 

9.7 “Principal Market” means the principal securities exchange or securities
market on which the Common Shares are then traded.

 

[Remainder of page intentionally left blank. Signature page follows.]

 

 16 

 

 

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

 

FAT BRANDS INC.         By: /s/ Andrew Wiederhorn   Name: Andrew Wiederhorn  
Title: Chief Executive Officer         VSTOCK TRANSFER, LLC         By: /s/ Yoel
Goldfeder   Name: Yoel Goldfeder   Title: Chief Executive Officer  

 

[Signature Page to Warrant Agency Agreement]

 

 17 

 

 

EXHIBIT A

 

WARRANT NUMBER:

 

CUSIP NUMBER: 30258N 113

 

FAT BRANDS INC.

 

WARRANT CERTIFICATE

 

THIS CERTIFIES THAT, _________________________, for value received is the
registered holder of a Warrant or Warrants (the “Warrant”) expiring on October
3, 2024, subject to extension in certain events (“Expiration Date”), to purchase
[●] fully paid and non-assessable shares (“Shares”) of common stock, par value
$0.0001 per share (“Common Stock”), of FAT Brands Inc., a Delaware corporation
(the “Company”). The Warrant entitles the holder thereof to purchase from the
Company such number of shares of Common Stock at the price of $8.50 per share
(subject to adjustment), upon surrender of this Warrant Certificate and payment
of the Warrant Price to VStock Transfer, LLC (the “Warrant Agent”), at its
offices designated for such purpose, but only subject to the conditions set
forth herein and in the Warrant Agency Agreement between the Company and the
Warrant Agent (as may be amended from time to time, the “Warrant Agency
Agreement”). The Warrant Agency Agreement provides that upon the occurrence of
certain events, the Warrant Price and the number of Shares purchasable
hereunder, set forth on the face hereof, may, subject to certain conditions, be
adjusted. The term “Warrant Price” as used in this Warrant Certificate refers to
the price per share of Common Stock at which Shares may be purchased at the time
the Warrant is exercised. Capitalized terms used and not defined herein shall
have the meanings set forth in the Warrant Agency Agreement.

 

No fraction of a Share will be issued upon any exercise of a Warrant. If the
holder of a Warrant would be entitled to receive a fraction of a Share upon any
exercise of a Warrant, the Company shall, at its election, either pay a cash
adjustment in respect of such fraction in an amount equal to such fraction
multiplied by the Exercise Price or round up such fraction to the next whole
share.

 

Upon any exercise of the Warrant for less than the total number of full Shares
provided for herein, there shall be issued to the registered holder hereof or
the registered holder’s assignee a new Warrant Certificate covering the number
of Shares for which the Warrant has not been exercised, provided that such
holder has previously surrendered this Warrant to the Warrant Agent.

 

Upon surrender of the Warrant Certificate for transfer, properly endorsed with
signatures properly guaranteed and accompanied by appropriate instructions for
transfer, the Warrant Agent shall register the transfer. A new Warrant
Certificate or Warrant Certificates evidencing in the aggregate a like number of
Warrants shall be issued and the old Warrant Certificate shall be canceled.

 

Warrant Certificates, when surrendered to the Warrant Agent, may be transferred
or exchanged in the manner and subject to the limitations provided in the
Warrant Agency Agreement, but without payment of any service charge, for another
Warrant Certificate or Warrant Certificates evidencing in the aggregate a like
number of Warrants.

 

The Company and the Warrant Agent may deem and treat the registered holder as
the absolute owner of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary.

 

This Warrant Certificate does not entitle the registered holder to any of the
rights of a stockholder of the Company.

 

 A-1 

 

 

FAT BRANDS INC.         By:                         Name:     Title:          
COUNTERSIGNED:         VSTOCK TRANSFER, LLC   as Warrant Agent         By:    

Authorized Officer:    

 

[Signature page to Warrant Certificate]

 

 A-2 

 

 

ELECTION TO PURCHASE FORM

 

(to be executed by the registered holder in order to exercise Warrants)

 

The undersigned registered holder irrevocably elects to exercise Warrants to
purchase                        shares of Common Stock represented by this
Warrant Certificate and to purchase such shares of Common Stock issuable upon
the exercise of such Warrants, and requests that such shares shall be issued in
the name of

 

  (PLEASE TYPE OR PRINT NAME AND ADDRESS)       (SOCIAL SECURITY OR TAX
IDENTIFICATION NUMBER)   and be delivered to:     (PLEASE PRINT OR TYPE NAME AND
ADDRESS)

 

and, at the sole election of the registered holder, if such number of Warrants
shall not be all the Warrants evidenced by this Warrant Certificate, that a new
Warrant Certificate for the balance of such Warrants be registered in the name
of, and delivered to, the registered holder at the address stated below:

 

Dated: ______________________           (SIGNATURE)           (ADDRESS)        
  (TAX IDENTIFICATION NUMBER)  

 

 A-3 

 

 

ASSIGNMENT

 

(to be executed by the registered holder in order to assign Warrants)

 

For Value Received,                                    hereby sells, assigns,
and transfers unto

 

  (PLEASE TYPE OR PRINT NAME AND ADDRESS)       (SOCIAL SECURITY OR TAX
IDENTIFICATION NUMBER)   and be delivered to:     (PLEASE PRINT OR TYPE NAME AND
ADDRESS)

 

Warrants to purchase                           shares of Common Stock
represented by this Warrant Certificate, and hereby irrevocably constitutes and
appoints                                           Attorney to transfer this
Warrant Certificate on the books of the Company, with full power of substitution
in the premises.

 

Dated: ______________________   _________________________ (SIGNATURE)  

 

The signature to the assignment of the Subscription Form must correspond to the
name written upon the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever, and must be
guaranteed by a commercial bank or trust company or a member firm of the
American Stock Exchange, New York Stock Exchange, Pacific Stock Exchange or
Chicago Stock Exchange.

 

 A-4