EXHIBIT 10.2

 

Jess Ravich

149 S Barrington Ave., P.O. 828

Los Angeles, CA 90049

 

November 28, 2018

 

ALJ Regional Holdings, Inc.

244 Madison Avenue, PMB #358

New York, NY 10016

 

Re: Backstop Letter Agreement - ALJ Regional Holdings, Inc.

Ladies and Gentlemen:

 

This letter is delivered to you in connection with (i) the Financing Agreement,
dated as of August 14, 2015 (as amended by the Fourth Amendment (as defined
below), and as further amended, restated, supplemented or otherwise modified
from time to time, the "Financing Agreement"), by and among ALJ Regional
Holdings, Inc., a Delaware corporation (“you"), Faneuil, Inc., Floors-N-More,
LLC, Phoenix Color Corp., each subsidiary of yours listed as a "Guarantor" on
the signature pages thereto, the lenders from time to time party thereto,
Cerberus Business Finance, LLC ("CBF") and PNC Bank, National Association, (ii)
the Fourth Amendment to Financing Agreement, dated as of the date hereof (the
"Fourth Amendment"), (iii) the Junior Participation Agreement, dated as of the
date hereof (the “Junior Participation Agreement”), by and between CBF and Jess
Ravich ("Junior Participant") and (iv) any other agreements, supplements,
documents and instruments relating thereto or executed in connection therewith,
all as from time to time amended and supplemented (together with the Financing
Agreement, the Fourth Amendment and the Junior Participation Agreement,
collectively the "Financing Documents"), regarding the sale by the Lenders to
the Junior Participant and the purchase by the Junior Participant from the
Lenders of a junior and subordinate participation interest in the Term Loan (the
“Junior Participation”).  Any capitalized term used herein and not defined shall
have the meaning assigned to it in the Financing Agreement. In connection with,
and in consideration of the agreements contained in the Financing Documents, you
agree with the Junior Participant as follows:

 

 

1.

Fees.

a.Commitment Fee. You will pay to the Ravich Revocable Trust of 1989, a trust
created by the Junior Participant (the “Junior Participant Trust”), a
non-refundable fee (the “Commitment Fee”) of 2.00% of the aggregate commitments
in respect of the Junior Participation Interest under the Junior Participation
Agreement.  For the avoidance of doubt, the Commitment Fee shall be one hundred
thousand dollars ($100,000) and shall be due and payable in cash upon your
acceptance of this Backstop Letter Agreement.

b.Warrant.  In the event that CBF exercises its rights under the Term Loan and
the Junior Participant buys the Junior Participation (the “Warrant Conditions”),
you will issue to the Junior Participant Trust a five-year warrant (the
“Warrant”)  to purchase 1,500,000 shares of

 

 

 

 

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your common stock, par value $0.01 per share, at a price equal to 100% of the
average closing price (as reported by The Nasdaq Capital Market) for the
trailing 30 trading days of your common stock on the Funding Date (as defined in
the Junior Participation Agreement). The Warrant will be in the form attached as
Exhibit A to this Agreement (the "Form of Warrant"). The Warrant shall be earned
upon satisfaction of the Warrant Conditions and issuable on the Funding Date .

c.In connection with the syndication of the Junior Participation Interest,
Junior Participant may, in its discretion, allocate to other parties
participating in the Junior Participation Interest portions of the Commitment
Fee or Warrant payable to the Junior Participant Trust therewith; provided,
however, that in no event shall the Company be obligated to pay any additional
fees or issue any additional securities (equity or otherwise), other than the
Commitment Fee and the Warrant as described herein.

 

2.

General.

You agree that, once paid, the Commitment Fees or any part thereof payable
hereunder will not be refundable under any circumstances. All Commitment Fees
payable hereunder will be paid in immediately available funds and shall not be
subject to reduction by way of setoff or counterclaim.  

It is understood that this Backstop Letter Agreement shall not constitute or
give rise to any obligation on the part of the Junior Participant to provide or
arrange any financing; such an obligation will arise only under the Junior
Participation Agreement in accordance with its terms. This Backstop Letter
Agreement may not be amended or any provision hereof waived or modified except
by an instrument in writing signed by each of the parties hereto. THIS BACKSTOP
LETTER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK. This Backstop Letter Agreement may be executed in
any number of counterparts, each of which shall be an original and all of which,
when taken together, shall constitute one agreement. Delivery of an executed
counterpart of a signature page of this Backstop Letter Agreement by facsimile
transmission shall be effective as delivery of a manually executed counterpart
of this Backstop Letter Agreement. Section headings used herein are for
convenience of reference only, are not part of this Backstop Letter Agreement
and are not to affect the construction of, or to be taken into consideration in
interpreting, this Backstop Letter Agreement.

[Signature Page Follows]

 

 

 

 

 

 

 

 

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/s/ Jess Ravich            .
Name: Jess Ravich

Address:  

149 S Barrington Ave., P.O. 828

Los Angeles, CA 90049

Email: jessravich@gmail.com

 

 

 

 

 

 

 

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ACCEPTED AND AGREED:

ALJ Regional Holdings, Inc.

 

By:/s/ Brian Hartman        .
Name:Brian Hartman
Title:Chief Financial Officer

 

 

 

 

 

 

 

 

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EXHIBIT A

NEITHER THIS WARRANT, NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT
(COLLECTIVELY, THE “SECURITIES”), HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT
RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.

ALJ REGIONAL HOLDINGS, INC.

Warrant to Purchase Common Stock

Warrant No.: [●]

Number of Shares of Common Stock: 1,500,000

Date of Issuance: [●] (“Issuance Date”)

ALJ Regional Holdings, Inc., a Delaware corporation (the “Company”), certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are acknowledged, the Ravich Revocable Trust of 1989, the registered holder
hereof or its permitted assigns (the “Holder”), is entitled, subject to the
terms set forth below, to purchase from the Company, at the Exercise Price (as
defined below) then in effect, upon surrender of this Warrant to Purchase Common
Stock (including any Warrants to Purchase Common Stock issued in exchange,
transfer or replacement hereof, the “Warrant”), at any time or times on or after
the Issuance Date, but not after 5:30 p.m., New York City time, on the
Expiration Date (as defined below), one million five-hundred thousand
(1,500,000) fully paid and nonassessable shares of Common Stock (the “Warrant
Shares”).  This Warrant has been issued pursuant to that certain Backstop Letter
Agreement, by and between the Company and the Holder, dated [●] (the “Backstop
Letter Agreement”).  In addition to the defined terms set forth in Section 16
herein, capitalized terms that are not otherwise defined herein shall have the
meanings assigned to such terms in the Backstop Letter Agreement.

Exercise of Warrant

.

(a)Mechanics of Exercise.  Subject to the terms and conditions hereof, this
Warrant may be exercised by the Holder on any day on or after the Issuance Date,
but not after 5:30 p.m., New York City time, on the Expiration Date, in whole or
in part, by (i) delivery of a written notice, in the form attached hereto as
Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this
Warrant and (ii) payment to the Company of an amount equal to the applicable
Exercise Price multiplied by the number of Warrant Shares as to which this
Warrant is being exercised (the “Aggregate Exercise Price”) in cash or wire
transfer of immediately available funds (the items under (i) and (ii) above, the
“Exercise Deliveries”).  The Holder shall not be required to surrender this
Warrant in order to effect an exercise hereunder; provided, however, that in the
event that this Warrant is exercised in full or for the remaining unexercised
portion hereof, the Holder shall deliver this Warrant to the Company for
cancellation within a reasonable time after such exercise.  No ink-original
Exercise Notice shall be required, nor shall

 

 

 

 

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any medallion guarantee (or other type of guarantee or notarization) of any
Exercise Notice be required.  On or before the Trading Day following the date on
which the Company has received the Exercise Deliveries (the date upon which the
Company has received the Exercise Deliveries, the “Exercise Date”), the Company
shall transmit by e-mail transmission an acknowledgment of confirmation of
receipt of the Exercise Deliveries to the Holder and the Company’s transfer
agent for the Common Stock (the “Transfer Agent”).  The Company shall deliver
any objection to the Exercise Deliveries on or before the second Trading Day
following the date on which the Company has received the Exercise
Deliveries.  On or before the fourth Trading Day following the date on which the
Company has received the Exercise Deliveries (the “Share Delivery Date”), the
Company shall cause the Transfer Agent to issue the Holder a certificate
representing the number of Warrant Shares to which the Holder is entitled, with
the appropriate restrictive legends, including as required by the Securities Act
or under any state securities or blue sky laws; provided, however, the Company
shall not be required to deliver such Warrant Shares if the Company has not
received the Aggregate Exercise Price for such Warrant Shares on or before the
Share Delivery Date.  Upon delivery of the Exercise Deliveries, the Holder shall
be deemed for all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date of delivery of such certificate.  If this Warrant is
submitted in connection with any exercise pursuant to this Section 1(a) and the
number of Warrant Shares represented by this Warrant submitted for exercise is
greater than the number of Warrant Shares being acquired upon an exercise, then
the Company shall as soon as practicable and in no event later than five Trading
Days after any such submission and at its own expense, issue a new Warrant (in
accordance with Section 6(e)) representing the right to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which this Warrant
has been and/or is exercised.  The Company shall pay any and all taxes that may
be payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the registration of any certificates for Warrants in a name other than that
of the Holder or an affiliate thereof.  The Holder shall be responsible for all
other tax liability that may arise as a result of holding or transferring this
Warrant or receiving Warrant Shares upon exercise hereof.

(b)Exercise Price.  For purposes of this Warrant, “Exercise Price” means $[●]
per share of Common Stock, a price equal to the average of the closing price (as
reported by the Principal Market) on the trailing 30 Trading Days prior to the
Funding Date, subject to adjustment as provided herein.

(c)Failure to Timely Deliver Shares.  In addition to any other rights available
to the Holder, if the Company fails to deliver the Warrant Shares to the Holder
by the fourth Trading Day after the Exercise Date, then the Holder will have the
right to rescind such exercise by giving written notice to the Company.

(d)No “Cashless Exercise”. Notwithstanding any other provision of this Warrant,
the Holder may not exercise this Warrant in whole or in part without making the
cash payment in the amount of the Aggregate Exercise Price to the Company;
provided, that at the request of the Holder, if desired to facilitate payment
through a broker-dealer sale and remittance procedure pursuant to which the
Holder’s brokerage firm will effect the immediate sale of some

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or all of the Warrant Shares exercised hereunder and remit to the Company the
Aggregate Exercise Price,  the Company agrees to, upon 90 days written notice
from the Holder, to use its reasonable best efforts to register the Warrant
Shares under the Securities Act for sale pursuant to a registration statement
filed by the Company and to cause such registration statement to be declared
effective by the Securities and Exchange Commission.

(e)Disputes.  In the case of a dispute as to the determination of the Exercise
Price or the arithmetic calculation of the number of Warrant Shares to be issued
pursuant to the terms hereof, the Company shall promptly issue to the Holder the
number of Warrant Shares that are not disputed and resolve such dispute in
accordance with Section 12 herein.

(f)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 that the Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the Exercise Price or
round up to the next whole share.

Adjustment of Exercise Price and Number of Warrant Shares

.  

The Exercise Price and the number of Warrant Shares shall be adjusted from time
to time as follows:

(a)Adjustment upon Subdivision or Combination of Shares of Common Stock.  If the
Company at any time on or after the Issuance Date: (i) pays a stock dividend or
otherwise makes a distribution or distributions on shares of Common Stock or any
other equity or equity equivalent securities payable in shares of Common Stock,
(ii) subdivides (by any stock split, stock dividend, recapitalization or
otherwise) outstanding shares of Common Stock into a larger number of shares,
(iii) combines (by combination, reverse stock split or otherwise) outstanding
shares of Common Stock into a smaller number of shares, or (iv) issues by
reclassification of shares of 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 (A) the numerator shall be the number of shares of Common
Stock outstanding on a fully-diluted basis immediately before such event, and
(B) the denominator shall be the number of shares of Common Stock outstanding on
a fully-diluted basis immediately after such event.  Any adjustment made
pursuant to this Section 2(a) shall become effective, (x) in the case of clause
(i) above, immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution, and (y) in the
case of clauses (ii), (iii) and (iv) above, immediately after the effective date
of such event.

(b)Other Events.  If any event occurs of the type contemplated by the provisions
of Section 2(a) but not expressly provided for by such provisions, then the
Company’s Board of Directors will make an appropriate adjustment in the Exercise
Price and the number of Warrant Shares so as to protect the rights of the
Holder; provided, that no such adjustment pursuant to this Section 2(b) will
increase the Exercise Price or decrease the number of Warrant Shares as
otherwise determined pursuant to this Section 2.

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(c)Notwithstanding anything to the contrary in this Warrant, in no event shall
the Exercise Price be reduced below the par value of the Company’s Common Stock.

Fundamental Transactions

. Upon the occurrence of any 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 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 with the same effect as if such Successor Entity had
been named as the Company herein.  Upon consummation of the Fundamental
Transaction, the Successor Entity shall deliver to the Holder confirmation that
there shall be issued upon exercise of this Warrant at any time after the
consummation of the Fundamental Transaction, in lieu of the shares of the Common
Stock (or other securities, cash, assets or other property purchasable upon the
exercise of the Warrant prior to such Fundamental Transaction), such shares of
stock, securities, cash, assets or any other property whatsoever (including
warrants or other purchase or subscription rights), if any, that the Holder
would have been entitled to receive upon the happening of such Fundamental
Transaction had this Warrant been exercised immediately prior to such
Fundamental Transaction, as adjusted in accordance with the provisions of this
Warrant.  In addition to and not in substitution for any other rights hereunder,
prior to the consummation of any Fundamental Transaction pursuant to which
holders of shares of Common Stock are entitled to receive securities or other
assets with respect to or in exchange for shares of Common Stock (a “Corporate
Event”), the Company shall make appropriate provision to ensure that the Holder
will thereafter have the right to receive upon an exercise of this Warrant
within 90 days after the consummation of the Fundamental Transaction but, in any
event, prior to the Expiration Date, in lieu of the shares of the Common Stock
(or other securities, cash, assets or other property) purchasable upon the
exercise of the Warrant prior to such Fundamental Transaction, such shares of
stock, securities, cash, assets or any other property whatsoever (including
warrants or other purchase or subscription rights) which the Holder would have
been entitled to receive upon the happening of such Fundamental Transaction had
the Warrant been exercised immediately prior to such Fundamental Transaction and
shall be applied without regard to any limitations on the exercise of this
Warrant.  Provision made pursuant to the preceding sentence shall be in a form
and substance reasonably satisfactory to the Holder.  The provisions of this
Section 3 shall apply similarly and equally to successive Fundamental
Transactions and Corporate Events and shall be applied without regard to any
limitations on the exercise of this Warrant.

Reservation of Warrant Shares

.  The Company covenants that it will at all times reserve and keep available
out of the aggregate of its authorized but unissued and otherwise unreserved
Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon
exercise of this Warrant as herein provided, the number of shares of Common
Stock which are then issuable and deliverable upon the exercise of this entire
Warrant, free from preemptive or any other contingent purchase rights of Persons
other than the Holder (taking into account the adjustments and restrictions in
Section 2).  Such reservation shall comply with the provisions of Section
1.  The Company covenants that all shares of Common Stock so issuable and
deliverable shall, upon issuance and the payment of the applicable Exercise
Price in accordance with the terms hereof, be duly and validly authorized,
issued and fully paid and nonassessable.  The Company will take all such actions
as may be necessary to assure that such shares of Common Stock may be issued as
provided herein without violation of any applicable

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law or regulation, or of any requirements of any securities exchange or
automated quotation system upon which the Common Stock may be listed.  If,
notwithstanding the foregoing, and not in limitation thereof, at any time while
this Warrant remains outstanding the Company does not have a sufficient number
of authorized and unreserved shares of Common Stock to satisfy its obligation to
reserve for issuance upon exercise of this Warrant at least a number of shares
of Common Stock equal to the maximum number of shares of Common Stock as shall
from time to time be necessary to effect the exercise of all this Warrant
(without regard to any limitations on exercise contained herein) (the “Required
Reserve Amount”), then the Company shall immediately take all action necessary
to increase the Company’s authorized shares of Common Stock to an amount
sufficient to allow the Company to reserve the Required Reserve Amount for this
entire Warrant.

Warrant Holder Not Deemed a Stockholder

.  Except as otherwise specifically provided herein, the Holder, solely in such
Person’s capacity as a holder of this 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 Warrant be construed to confer
upon the Holder, solely in such Person’s capacity as the Holder of this 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 Holder of the Warrant Shares
which such Person is then entitled to receive upon the due exercise of this
Warrant.  In addition, nothing contained in this Warrant shall be construed as
imposing any liabilities on the Holder to purchase any securities (upon exercise
of this Warrant or otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.

Registration and Reissuance of Warrants

.

(a)Registration of Warrant.  The Company shall register this Warrant, upon the
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.  The
Company shall also register any transfer, exchange, reissuance or cancellation
of any portion of this Warrant in the Warrant Register.

(b)Transfer of Warrant.  This Warrant may be offered for sale, sold, transferred
or assigned without the consent of the Company, except as may otherwise be
required by applicable securities laws.  Subject to applicable securities laws,
if this Warrant is to be transferred, the Holder shall surrender this Warrant to
the Company together with all applicable transfer taxes, whereupon the Company
will forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 6(e)), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less than the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 6(e)) to the Holder representing the right to purchase the number
of Warrant Shares not being transferred.  

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(c)Lost, Stolen or Mutilated Warrant.  Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant, and, in the case of loss, theft or destruction, of
any indemnification undertaking by the Holder to the Company in customary form
or the provision of reasonable security by the Holder to the Company and, in the
case of mutilation, upon surrender and cancellation of this Warrant, the Company
shall execute and deliver to the Holder a new Warrant (in accordance with
Section 6(e)) representing the right to purchase the Warrant Shares then
underlying this Warrant.

(d)Exchangeable for Multiple Warrants.  This Warrant is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company together
with all applicable transfer taxes, for a new Warrant or Warrants (in accordance
with Section 6(e)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new Warrant
will represent the right to purchase such portion of such Warrant Shares as is
designated by the Holder at the time of such surrender; provided, however, that
the Company shall not be required to issue Warrants for fractional shares of
Common Stock hereunder.

(e)Issuance of New Warrants.  Whenever the Company is required to issue a new
Warrant pursuant to the terms of this Warrant, such new Warrant shall (i) be of
like tenor with this Warrant, (ii) represent, as indicated on the face of such
new Warrant, the right to purchase the Warrant Shares then underlying this
Warrant (or in the case of a new Warrant being issued pursuant to Section 6(b)
or Section 6(c), the Warrant Shares designated by the Holder which, when added
to the number of shares of Common Stock underlying the other new Warrants issued
in connection with such issuance, does not exceed the number of Warrant Shares
then underlying this Warrant), (iii) have an issuance date, as indicated on the
face of such new Warrant which is the same as the Issuance Date and (iv) have
the same rights and conditions as this Warrant.

Notices

.  Whenever notice is required to be given under this Warrant, unless otherwise
provided herein, such notice shall be given in accordance with the information
set forth in the Warrant Register.  The Company shall provide the Holder with
prompt written notice of all actions taken pursuant to this Warrant, including,
in reasonable detail, a description of such action and the reason or reasons
therefore.  Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) immediately upon any adjustment of the
Exercise Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least 20 days prior to the date on
which the Company closes its books or takes a record (A) with respect to any
dividend or distribution upon the shares of Common Stock or (B) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or
liquidation; provided, that in each case, such information shall be made known
to the public prior to or in conjunction with such notice being provided to the
Holder.

Noncircumvention

.  The Company hereby covenants and agrees that the Company will not, by
amendment of its Certificate of Incorporation, Bylaws or through any
reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or

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performance of any of the terms of this Warrant, and will at all times in good
faith carry out all the provisions of this Warrant and take all action as may be
required to protect the rights of the Holder.  Without limiting the generality
of the foregoing, the Company (i) shall not increase the par value of any shares
of Common Stock receivable upon the exercise of this Warrant above the Exercise
Price then in effect, (ii) shall use all reasonable efforts to take all such
actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant and (iii) shall, so long as any of the Warrants are
outstanding, take all action necessary to reserve and keep available out of its
authorized and unissued shares of Common Stock, solely for the purpose of
effecting the exercise of the Warrants, the number of shares of Common Stock as
shall from time to time be necessary to effect the exercise of the Warrants then
outstanding (without regard to any limitations on exercise).

Amendment and Waiver

.  Except as otherwise provided herein, the provisions of this Warrant may be
amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has
obtained the written consent of the Holder.  No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Warrants then outstanding.

Governing Law

.  This Warrant shall be governed by and construed and enforced in accordance
with, and all questions concerning the construction, validity, interpretation
and performance of this Warrant shall be governed by, the internal laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of New York.

Construction; Headings

.  This Warrant shall be deemed to be jointly drafted by the Company and the
Holder and shall not be construed against any person as the drafter hereof.  The
headings of this Warrant are for convenience of reference and shall not form
part of, or affect the interpretation of, this Warrant.

Dispute Resolution

.  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 submit the
disputed determinations or arithmetic calculations via email within two Trading
Days of receipt of the Exercise Notice giving rise to such dispute, as the case
may be, to the Holder.  If the Holder and the Company are unable to agree upon
such determination or calculation of the Exercise Price or the Warrant Shares
within five Trading Days of such disputed determination or arithmetic
calculation being submitted to the Holder, then the Company shall, within three
Trading Days submit via email (a) the disputed determination of the Exercise
Price to an independent, reputable investment bank selected by the Company and
approved by the Holder or (b) the disputed arithmetic calculation of the Warrant
Shares to the Company’s independent, outside accountant.  The Company shall
cause the investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the Holder of the
results no later than 10 Trading Days from the time it receives the disputed
determinations or calculations.  Such investment bank’s or accountant’s
determination or calculation, as the case may be, shall be binding upon all
parties absent demonstrable error.  The expenses of the investment bank and
accountant will be borne by the

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Company unless the investment bank or accountant determines that the
determination of the Exercise Price or the arithmetic calculation of the Warrant
Shares by the Holder was incorrect by ten percent (10%) or more, in which case
the expenses of the investment bank and accountant will be borne by the Holder.

Remedies, Other Obligations, Breaches and Injunctive Relief

.  The remedies provided in this Warrant shall be cumulative and in addition to
all other remedies available under this Warrant, at law or in equity (including
a decree of specific performance and/or other injunctive relief), and nothing
herein shall limit the right of the Holder to pursue actual damages for any
failure by the Company to comply with the terms of this Warrant.  The Company
acknowledges that a breach by it of its obligations hereunder would cause
irreparable harm to the Holder and that the remedy at law for any such breach
would be inadequate.  The Company therefore agrees that, in the event of any
such breach or threatened breach, the holder of this Warrant shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach.  Notwithstanding the foregoing or anything else herein to the contrary,
other than as expressly provided in Section 1(c) hereof, if the Company is for
any reason unable to issue and deliver Warrant Shares upon exercise of this
Warrant as required pursuant to the terms hereof, the Company shall have no
obligation to pay to the Holder any cash or other consideration or otherwise
“net cash settle” this Warrant.

Limitation on Liability

.  No provisions hereof, in the absence of affirmative action by the Holder to
purchase Warrant Shares hereunder, shall give rise to any liability of the
Holder to pay the Exercise Price or as a shareholder of the Company (whether
such liability is asserted by the Company or creditors of the Company).

Successors and Assigns

.  This Warrant shall bind and inure to the benefit of and be enforceable by the
Company and the Holder and their respective permitted successors and assigns.

Certain Definitions

.  For purposes of this Warrant, the following terms shall have the following
meanings:

“Common Stock” means (i) the Company’s shares of Common Stock, $0.01 par value
per share, 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.

“Eligible Market” means The New York Stock Exchange, Inc., the NYSE MKT or The
Nasdaq Stock Market.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Expiration Date” means the date that is the fifth (5th) anniversary of the
Issuance Date or, if such date falls on a day other than a Trading Day or on
which trading does not take place on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is
then traded (a “Holiday”), the next date that is not a Holiday.

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“Fundamental Transaction” means that the Company shall, directly or indirectly,
in one or more related transactions, (i) consolidate or merge with or into
another Person, (ii) sell, assign, transfer, convey or otherwise dispose of all
or substantially all of the properties or assets of the Company to another
Person, (iii) allow another Person to make a purchase, tender or exchange offer
that is accepted by the holders of more than 50% of the outstanding shares of
Common Stock (not including any shares of Common Stock held by the Person or
Persons making or party to, or associated or affiliated with the Persons making
or party to, such purchase, tender or exchange offer), (iv) consummate a stock
purchase agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person 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 purchase
agreement or other business combination), (v) reorganize, recapitalize or
reclassify its Common Stock or (vi) any “person” or “group” (as these terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall
become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 50% of the aggregate ordinary voting power
represented by issued and outstanding Common Stock.

“Person” means an individual, company, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including a “person”
as defined in Section 13(d)(3) of the Exchange Act), trust, association or
entity or government, political subdivision, agency or instrumentality of a
government.

“Principal Market” means The NASDAQ Stock Market.

“Securities Act” means the Securities Act of 1933, as amended.

“Successor Entity” means the Person formed by, resulting from or surviving any
Fundamental Transaction or the Person with which such Fundamental Transaction
shall have been entered into.

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

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock
to be duly executed as of the Issuance Date set forth above.

 

ALJ REGIONAL HOLDINGS, INC.

 

By:

Name:
Title:

 

 

 

[Signature Page to Warrant]

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EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

ALJ REGIONAL HOLDINGS, INC.

The undersigned, the holder of a right to purchase shares of Common Stock of ALJ
Regional Holdings, Inc., a Delaware corporation (the “Company”), pursuant to
that certain Warrant to Purchase Common Stock of ALJ Regional Holdings, Inc.
(the “Warrant”), dated as of _______________, 2018, hereby irrevocably elects to
exercise the purchase right represented by such Warrant for, and to purchase
thereunder, __________________________ (_________) shares of Common Stock of the
Company and herewith makes payment of _________________________________ Dollars
($__________) therefor in cash.

The undersigned represents that it is acquiring such securities for its own
account for investment and not with a view to or for sale in connection with any
distribution thereof and is an accredited investor as such term is defined in
Rule 501 of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the “Securities Act”). The
undersigned understands that such securities have not been and are not being
registered under the Securities Act or any state securities laws and may not be
offered for sale, sold, assigned or transferred unless (i) subsequently
registered thereunder or (ii) sold in reliance on an exemption therefrom. The
undersigned understands that such securities are being offered and will be sold
to it in reliance on specific exemptions from the registration requirements of
the U.S. federal and state securities laws and that the Company is relying upon
the truth and accuracy of, and the undersigned’s compliance with, the
representations and warranties of the undersigned set forth herein in order to
determine the availability of such exemptions and the eligibility of the
undersigned to acquire such Securities.

 

DATED:  ________________

[NAME OF HOLDER]

 

 

 

By:

 

Name:

 

Its:

 

 

 

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ACKNOWLEDGMENT

The Company hereby acknowledges this Exercise Notice.

ALJ REGIONAL HOLDINGS, INC.

 

By:

Name:
Title: