Exhibit 10.22


 


EXECUTION COPY




  


SECOND EXCHANGE AGREEMENT


 


This Second Exchange
Agreement (the “Agreement”) is entered into as of the 8th day of November, 2019, by and among KushCo
Holdings, Inc., a Nevada corporation with offices located at 6261 Katella Avenue, Suite 250, Cypress, CA 90630 (the “Company”)
and the investor signatory hereto (the “Holder”), with reference to the following facts:


 


A.                  
Prior to the date hereof, pursuant to that Securities Purchase Agreement, dated as of April 29, 2019, by and between the
Company and the investors party thereto (as the same has been amended, restated, amended and restated, supplemented or otherwise
modified prior to the date hereof, the “Securities Purchase Agreement”), the Company issued a senior note (as
the same has been amended, restated, amended and restated, supplemented or otherwise modified prior to the date hereof, the “Original
Note” and together with the Securities Purchase Agreement, the “Existing Note Documents”) to the Holder,
as the initial holder. Capitalized terms used but not otherwise defined herein shall have the meanings as set forth in the Securities
Purchase Agreement (as amended hereby) or, as the context may require, the Original Note.


 


B.                   
Prior to the date hereof, pursuant to that certain Exchange Agreement, dated August 21, 2019 (the “First Exchange
Agreement”), the Company exchanged the Original Note for a new senior note (the “Existing Note”) and
a warrant to purchase Common Stock of the Company (the “Existing Warrant”).


 


C.                   
As of the date of this Agreement, the Holder is the holder of the Existing Note issued under the First Exchange Agreement
and has not assigned, transferred or exchanged the Existing Note.


 


D.                  
The Company and the Holder desire to amend and waive certain provisions of the Existing Note Documents and exchange (the
 “Exchange” or the “Transaction”) the Existing Note, on the basis and subject to the terms
and conditions set forth in this Agreement, for a new senior note in such aggregate principal amount as set forth on the signature
page of the Holder attached hereto, in the form attached hereto as Exhibit A (the “New Note”).


 


E.                   
The New Note and this Agreement and such other documents and certificates related thereto are collectively referred to herein
as the “Exchange Documents”.


 


F.                    
The Exchange is being made in reliance upon the exemption from registration provided by Section 3(a)(9) of the Securities
Act of 1933, as amended (the “Securities Act”).


 


NOW, THEREFORE, in consideration
of the foregoing premises and the mutual covenants hereinafter contained, the parties hereto agree as follows:


 


1.                  Exchange.
On the Closing Date (as defined below), subject to the terms and conditions of this Agreement, pursuant to Section 3(a)(9) of
the Securities Act, the Holder shall convey, assign and transfer the Existing Note to the Company in exchange for which the
Company shall issue the New Note to the Holder. On the Closing Date, in exchange for the Existing Note, the Company shall
deliver or cause to be delivered to the Holder (or its designee) the New Note at the address for delivery set forth on the
signature page of the Holder attached hereto. Immediately following the delivery of the New Note to the Holder (or
its designee), the Holder shall relinquish all rights, title and interest in the Existing Note (including any claims the
Holder may have against the Company related thereto) and assign the same to the Company, and the Existing Note shall be
deemed canceled.


 






    


     


    

 


2.                 
Ratifications; Incorporation of Terms under Transaction Documents.


 


(a)              
Ratifications. Except as otherwise expressly provided herein, the Securities Purchase Agreement and each other Transaction
Document, is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects, except that
on and after the date hereof: (i) all references in the Securities Purchase Agreement to “this Agreement”, “hereto”,
 “hereof”, “hereunder” or words of like import referring to the Securities Purchase Agreement shall mean
the Securities Purchase Agreement as amended by this Agreement, and (ii) all references in the other Transaction Documents to the
 “Securities Purchase Agreement”, “thereto”, “thereof”, “thereunder” or words of
like import referring to the Securities Purchase Agreement shall mean the Securities Purchase Agreement as amended by this Agreement.


 


(b)              
Amendments and Incorporation of Terms under Transaction Documents. Effective as of the date hereof, the Securities
Purchase Agreement and each of the other Transaction Documents are hereby amended as follows (and any such agreements, covenants
and related provisions therein shall be deemed incorporated by reference herein, mutatis mutandis, as amended as such):


 


(i) The defined
term “Notes” is hereby amended to mean the New Note (as defined herein).


 


(ii) The defined
term “Transaction Documents” is hereby amended to include this Agreement and the other Exchange Documents.


 


(c)              
Amendment of First Exchange Agreement; Acknowledgement. Effective as of the Closing Date, Section 17 of the First
Exchange Agreement is hereby amended to replace “New Note” with New Note (as defined herein). The Company hereby acknowledges
and agrees that, after giving effect to the foregoing amendment, the MFN Termination Date (as defined in the First Exchange Agreement)
shall not occur until such dates as no New Note (as defined herein) remains outstanding.


 


3.                 
[Intentionally Omitted]


 


4.                 
Company Representations and Warranties. As of the date hereof and as of the Closing Date (as defined below):


 


4.1.            Each
of the Company and each of its Subsidiaries are entities duly organized and validly existing and in good standing under the
laws of the jurisdiction in which they are formed, and have the requisite power and authority to own their properties and to
carry on their business as now being conducted and as presently proposed to be conducted. Each of the Company and each of its
Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in
which the character of the properties owned or leased by it or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not reasonably
be expected to have a Material Adverse Effect (as defined below). As used in this Agreement, “Material
Adverse Effect” means any material adverse effect on (i) the business, properties, assets, liabilities, operations
(including results thereof), condition (financial or otherwise) or prospects of the Company and its Subsidiaries, taken as a
whole, (ii) the transactions contemplated hereby or in any of the other Exchange Documents or any other agreements or
instruments to be entered into in connection herewith or therewith or (iii) the authority or ability of the Company or any of
its Subsidiaries to perform any of their respective obligations under any of the Exchange Documents (as defined below). Other
than the Persons (as defined below) set forth on Schedule 4.1, the Company has no Subsidiaries.


 






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4.2.           
Authorization and Binding Obligation. The Company has the requisite power and authority to enter into and perform
its obligations under this Agreement, the New Note and each of the other agreements entered into by the parties hereto in connection
with the transactions contemplated by the Exchange Documents and to consummate the Transaction (including, without limitation,
the issuance of the New Note in accordance with the terms hereof and thereof). As of the Closing Date, the execution and delivery
of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the New Note will have been duly authorized by the Company’s Board of Directors
(or a duly authorized committee thereof) and no further filing, consent, or authorization will be required by the Company, its
Board of Directors or its shareholders (other than such filings as may be required by any federal or state securities laws, rules
or regulations). This Agreement has been and, as of the Closing Date, the other Exchange Documents to which the Company is a party
will have been, duly executed and delivered by the Company, and constitute or will constitute, as applicable, the legal, valid
and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies
and except as rights to indemnification and to contribution may be limited by federal or state securities laws.


 


4.3.           
No Conflict. The execution, delivery and performance of the Exchange Documents by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the New Note)
will not (i) result in a violation of the Articles of Incorporation (as defined below) or any other organizational documents of
the Company or any of its Subsidiaries, any capital stock of the Company or any of its Subsidiaries or Bylaws (as defined below)
of the Company or any of its Subsidiaries, (ii) conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party and the receipt by the Company
of the Required Consents (as defined below), or (iii) result in a violation of any law, rule, regulation, order, judgment or decree
(including foreign, federal and state securities laws and regulations and the rules and regulations of the OTCQX (the “Principal
Market”) and including all applicable federal laws, rules and regulations) applicable to the Company or any of its Subsidiaries
or by which any property or asset of the Company or any of its Subsidiaries is bound or affected except, in the case of clause
(ii) or (iii) above, to the extent such violations that would not reasonably be expected to have a Material Adverse Effect.


 


4.4.           
No Consents. Except as set forth on Schedule 4.4 (the “Required Consents”), neither the Company
nor any Subsidiary is required to obtain any consent from, authorization or order of, or make any filing or registration with (other
than such filings as may be required by any federal or state securities laws, rules or regulations), any Governmental Entity or
any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its respective
obligations under or contemplated by the Exchange Documents, in each case, in accordance with the terms hereof or thereof. All
consents, authorizations, orders, filings and registrations which the Company or any Subsidiary is required to obtain pursuant
to the preceding sentence have been or will be obtained or effected on or prior to the Closing Date, and neither the Company nor
any of its Subsidiaries are aware of any facts or circumstances which might prevent the Company or any of its Subsidiaries from
obtaining or effecting any of the registration, application or filings contemplated by the Exchange Documents.


 






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4.5.           
Securities Law Exemptions. Assuming the accuracy of the representations and warranties of the Holder contained herein,
the offer and issuance by the Company of the New Note is exempt from registration under the Securities Act pursuant to the exemption
provided by Section 3(a)(9) thereof.


 


4.6.           
Status of Existing Note; Issuance of New Note.


 


(a)              
The Company has no knowledge that the Existing Note is subject to dispute and to the knowledge of the Company there is no
action based on the Existing Note that is currently pending in any court or other legal venue and to the knowledge of the Company
no judgments based upon the Existing Note have been previously entered in any legal proceeding. The Company has not received any
written notice from the Holder or any other person challenging or disputing the Existing Note, or any portion thereof, and prior
to the Exchange, the Company is unconditionally obligated to pay the entire aggregate principal amount outstanding under the Existing
Note (and any accrued and unpaid interest thereunder) without defense, counterclaim or offset. Upon the Exchange, the Company is
unconditionally obligated to pay the entire aggregate principal amount outstanding under the New Note (and any accrued and unpaid
interest thereunder) without defense, counterclaim or offset.


 


(b)               As
of the Closing Date, the issuance of the New Note will be duly authorized and upon issuance in accordance with the terms of
the Exchange Documents shall be validly issued, fully paid and non-assessable and free from all Liens (as defined in the
New Note). By virtue of Section 3(a)(9) under the Securities Act, the New Note will have a Rule 144 holding period that will
be deemed to have commenced as of the Closing Date (as defined in the Securities Purchase Agreement), the date of the
original issuance of the Original Note to the Holder. At any time on and after the date hereof, assuming (i) the Holder is
not an affiliate of the Company and (ii) at such time of determination the Company has not failed to satisfy the requirements
of Rule 144(c)(1), including, without limitation, the failure to satisfy the current public information requirement under
Rule 144(c) (a “Current Public Information Failure”), the New Note shall not be required to bear any
restrictive legend and shall be freely transferable by the Holder pursuant to and in accordance with Rule 144 of the
Securities Act (“Rule 144”).


 






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4.7.           
Transfer Taxes. On the Closing Date, all share transfer or other taxes (other than income or similar taxes) that
are required to be paid in connection with the issuance of the New Note to be issued to the Holder hereunder will be, or will have
been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with.


 


4.8.           
Conduct of Business; Regulatory Permits. Neither the Company nor any of its Subsidiaries is in material violation
of any term of or in default under its Articles of Incorporation, any certificate of designation, preferences or rights of any
other outstanding series of preferred stock of the Company or any of its Subsidiaries or Bylaws or their organizational charter,
certificate of formation, memorandum of association, articles of association, Articles of Incorporation or certificate of incorporation
or bylaws, respectively. Neither the Company nor any of its Subsidiaries is in material violation of any judgment, decree or order
or any statute, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries, and neither the Company nor
any of its Subsidiaries will conduct its business in violation of any of the foregoing, except in all cases for possible violations
which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Without limiting the
generality of the foregoing, except as set forth in the SEC Documents, the Company is not in material violation of any of the rules,
regulations or requirements of the Principal Market and has no knowledge of any facts or circumstances that could reasonably lead
to delisting or suspension of the Common Stock by the Principal Market in the foreseeable future. Except as set forth in SEC Documents,
during the two years prior to the date hereof, (i) the Common Stock has been listed or designated for quotation on the Principal
Market, (ii) trading in the Common Stock has not been suspended by the Securities and Exchange Commission (“SEC”)
or the Principal Market and (iii) the Company has received no communication, written or oral, from the SEC or the Principal Market
regarding the suspension or delisting of the Common Stock from the Principal Market. The Company and each of its Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate regulatory authorities necessary to conduct their respective
businesses, except where the failure to possess such certificates, authorizations or permits would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, and neither the Company nor any such Subsidiary has received
any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit. There is
no agreement, commitment, judgment, injunction, order or decree binding upon the Company or any of its Subsidiaries or to which
the Company or any of its Subsidiaries is a party which has or would reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of the Company or any of its Subsidiaries, any acquisition of property by the Company
or any of its Subsidiaries or the conduct of business by the Company or any of its Subsidiaries as currently conducted other than
such effects, individually or in the aggregate, which have not had and would not reasonably be expected to have a Material Adverse
Effect on the Company or any of its Subsidiaries.


 


4.9.           
Transactions With Affiliates. Except as set forth in the SEC Documents or as set forth on Schedule 4.9, none of the
officers or directors of the Company or its Subsidiaries and, to the knowledge of the Company, none of the employees of the Company
or its Subsidiaries is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees,
officers and directors) required to be disclosed under Item 404 of Regulation S-K under the Exchange Act.


 






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4.10.       
Equity Capitalization. 


 


(a)        
Definitions: 


 


(i)     
“Common Stock” means (x) the Company’s shares of common stock, $0.0001 par value per share,
and (y) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification
of such common stock.


 


(ii)     
“Preferred Stock” means (x) the Company’s blank check preferred stock, $0.0001 par value per share,
the terms of which may be designated by the board of directors of the Company in a certificate of designations and (y) any capital
stock into which such preferred stock shall have been changed or any share capital resulting from a reclassification of such preferred
stock (other than a conversion of such preferred stock into Common Stock in accordance with the terms of such certificate of designations).


 


(b)        
Authorized and Outstanding Capital Stock. As of the date hereof, the authorized capital stock of the Company consists
of (A) 265,000,000 shares of Common Stock, of which 107,360,577 are issued and outstanding and 31,752,472 shares are reserved for
issuance pursuant to Convertible Securities (as defined below) exercisable or exchangeable for, or convertible into, shares of
Common Stock and (B) 10,000,000 shares of Preferred Stock, none of which are issued and outstanding. No shares of Common Stock
are held in the treasury of the Company.


 


(c)        
Valid Issuance; Available Shares; Affiliates. All of such outstanding shares are duly authorized and have been, or
upon issuance will be, validly issued, fully paid and nonassessable. The SEC Documents accurately set forth, as of the dates referred
to therein, the number of shares of Common Stock that are (A) reserved for issuance pursuant to Convertible Securities (as defined
below) and (B) that are, as of the date referred to therein, owned by Persons who are “affiliates” (as defined in Rule
405 of the Securities Act and calculated based on the assumption that only officers, directors and holders of at least 10% of the
Company’s issued and outstanding Common Stock are “affiliates” without conceding that any such Persons are “affiliates”
for purposes of federal securities laws) of the Company or any of its Subsidiaries. “Convertible Securities”
means any capital stock or other security of the Company or any of its Subsidiaries that is at any time and under any circumstances
directly or indirectly convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire,
any capital stock or other security of the Company (including, without limitation, Common Stock) or any of its Subsidiaries.


 


(d)         Existing
Securities; Obligations. Except as disclosed in the SEC Documents or on Schedule 4.10: (A) none of the Company’s or
any Subsidiary’s shares, interests or capital stock is subject to preemptive rights or any other similar rights or
Liens suffered or permitted by the Company or any Subsidiary; (B) there are no outstanding options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any shares, interests or capital stock of the Company or any of its Subsidiaries, or
contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound
to issue additional shares, interests or capital stock of the Company or any of its Subsidiaries or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible
into, or exercisable or exchangeable for, any shares, interests or capital stock of the Company or any of its Subsidiaries;
(C) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the Securities Act; (D) there are no outstanding securities or instruments of the
Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem
a security of the Company or any of its Subsidiaries; (E) neither the Company nor any Subsidiary has any stock appreciation
rights or “phantom stock” plans or agreements or any similar plan or agreement; and (F) there are no securities
or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the New Note.


 






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(e)        
Organizational Documents. True, correct and complete copies of the Company’s Articles of Incorporation, as
amended and as in effect on the date hereof (the “Articles of Incorporation”), and the Company’s Bylaws,
as in effect on the date hereof (the “Bylaws”), and the terms of all Convertible Securities and the material
rights of the holders thereof in respect thereto, are set forth in, or filed as exhibits to, the SEC Documents, or otherwise set
forth on Schedule 4.10.


 


4.11.       
Indebtedness and Other Contracts. Except as disclosed in the SEC Documents or on Schedule 4.11, neither the Company
nor any of its Subsidiaries, (i) has any outstanding debt securities, notes, credit agreements, credit facilities or other agreements,
documents or instruments evidencing Indebtedness of the Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound (other than the Senior Secured Documents to be entered into immediately after consummating
the Exchange), (ii) is a party to any contract, agreement or instrument, the violation of which, or default under which, by the
other party(ies) to such contract, agreement or instrument would reasonably be expected to result in a Material Adverse Effect,
(iii) is in violation of any term of, or in default under, any contract, agreement or instrument relating to any Indebtedness,
except where such violations and defaults would not reasonably be expected to result, individually or in the aggregate, in a Material
Adverse Effect (other than the Notes and the Securities Purchase Agreement), or (iv) is a party to any contract, agreement or instrument
relating to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is expected to
have a Material Adverse Effect. Prior to the date hereof, the Company has repaid, in full, all of the outstanding obligations under
the Current Facility (as defined in the Original Note) and no outstanding disputes exist between the lenders under the Current
Facility and the Company or any of its Subsidiaries.


 


4.12.       
Litigation. Except as set forth in the SEC Documents, there is no action, claim, suit, investigation or proceeding
before any Governmental Entity pending or, to the knowledge of the Company, threatened against the Company or its Subsidiaries
wherein an unfavorable decision, ruling or finding would reasonably be expected to, individually or in the aggregate, (i) materially
adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under,
the Exchange Documents or (ii) have a Material Adverse Effect. The Company is not a party to or subject to the provisions
of any injunction, judgment, decree or order of any court, regulatory body, administrative agency or other governmental agency
or body that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.


 





4.13.       
No Consideration Paid. No consideration, commission or other remuneration has been paid by the Holder to the Company,
its Subsidiaries or any of their agents or affiliates in connection with the Exchange.


 






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4.14.       
Disclosure. Except as disclosed in the Cleansing Filing, the Company confirms that neither it nor any other Person
acting on its behalf has provided the Holder or its agents or counsel with any information that constitutes or could reasonably
be expected to constitute material, non-public information concerning the Company or any of its Subsidiaries, other than the existence
of the transactions contemplated by this Agreement and the other Exchange Documents and any matters disclosed in the Cleansing
Filing (as defined below). The Company understands and confirms that the Holder will rely on the foregoing representations in effecting
transactions in securities of the Company.


 


5.                 
Holder’s Representations and Warranties. As a material inducement to the Company to enter into this Agreement
and consummate the Exchange, the Holder hereby represents and warrants with and to the Company, as of the date hereof and as of
the Closing Date, as follows:


 


5.1       Reliance
on Exemptions. The Holder understands that the New Note is being offered and exchanged in reliance on specific exemptions from
the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the
truth and accuracy of, and the Holder’s compliance with, the representations, warranties, agreements, acknowledgments and
understandings of the Holder set forth herein and in the other Exchange Documents in order to determine the availability of such
exemptions and the eligibility of the Holder to acquire the New Note.


 


5.2       No
Governmental Review. The Holder understands that no United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the New Note or the fairness or suitability of the investment
in the New Note nor have such authorities passed upon or endorsed the merits of the offering of the New Note.


 


5.3       Validity;
Enforcement. This Agreement and the other Exchange Documents to which the Holder is a party have been duly and validly authorized,
executed and delivered on behalf of the Holder and shall constitute the legal, valid and binding obligations of the Holder enforceable
against the Holder in accordance with their respective terms, except as such enforceability may be limited by general principles
of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to,
or affecting generally, the enforcement of applicable creditors’ rights and remedies.


 


5.4       No
Conflicts. The execution, delivery and performance by the Holder of this Agreement and the other Exchange Documents to
which the Holder is a party, and the consummation by the Holder of the transactions contemplated hereby and thereby will not
(i) result in a violation of the organizational documents of the Holder or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Holder is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws)
applicable to the Holder, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or
violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the
ability of the Holder to perform its obligations hereunder.


 


5.5       Investment
Risk; Sophistication. The Holder is acquiring the New Note hereunder in the ordinary course of its business. The Holder has
such knowledge, sophistication, and experience in business and financial matters so as to be capable of evaluation of the merits
and risks of the prospective investment in the New Note, and has so evaluated the merits and risk of such investment. The Holder
is an “accredited investor” as defined in Regulation D under the Securities Act.


 






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5.6       Ownership
of Existing Note. The Holder owns the Existing Note free and clear of any Liens (other than the obligations pursuant to this
Agreement, the Transaction Documents and applicable securities laws) and has the requisite power and authority to enter into and
perform its obligations under this Agreement and each of the other Exchange Documents to which it is a party and to consummate
the Transaction.


 


5.7       Transfer
or Resale. The Holder understands that: (i) the New Note has not been and is not being registered under the Securities Act
or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered
thereunder, (B) the Holder shall have delivered to the Company (if requested by the Company) an opinion of counsel, in a form reasonably
acceptable to the Company, to the effect that such New Note to be sold, assigned or transferred may be sold, assigned or transferred
pursuant to an exemption from such registration, or (C) the Holder provides the Company with reasonable assurance that such New
Note can be sold, assigned or transferred pursuant to Rule 144; (ii) any sale of the New Note made in reliance on Rule 144 may
be made only in accordance with the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of the New Note under
circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations
of the SEC promulgated thereunder; and (iii) neither the Company nor any other Person is under any obligation to register the New
Note under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.
Notwithstanding the foregoing, the New Note may be pledged in connection with a bona fide margin account or other loan or financing
arrangement secured by the New Note and such pledge of New Note shall not be deemed to be a transfer, sale or assignment of the
New Note hereunder, and the Holder effecting a pledge of New Note shall not be required to provide the Company with any notice
thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Exchange Document, including, without
limitation, this Section 5.7.


 


6.                 
Closing; Conditions. Subject to the conditions set forth below, the Exchange shall take place at the offices of Kelley
Drye & Warren LLP, 101 Park Avenue, New York, NY 10178, on the Business Day immediately following such date as the Company
shall have satisfied all conditions to closing below, or at such other time and place as the Company and the Holder mutually agree
(the “Closing” and the “Closing Date”).


 


6.1.       Condition’s
to Holder’s Obligations. The obligation of the Holder to consummate the Exchange is subject to the fulfillment, to the
Holder’s reasonable satisfaction, prior to or at the Closing, of each of the following conditions (unless waived by the
Holder in writing, prior to the Closing):


 


(a)       Representations
and Warranties; Covenants. The representations and warranties of the Company contained in this Agreement shall be true and
correct in all material respects (except for those representations and warranties that are qualified by materiality or Material
Adverse Effect, which are accurate in all respects) on the date hereof and on and as of the Closing Date as if made on and as of
such date (except for representations and warranties that speak as of a specific date, which are accurate in all material respects
(except for those representations and warranties that are qualified by materiality or Material Adverse Effect, which are accurate
in all respects) as of such specified date). The Company shall have performed, satisfied and complied in all respects with the
covenants, agreements and conditions required to be performed, satisfied or complied with by the Company at or prior to the Closing
Date.


 






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(b)       Issuance
of New Note. At the Closing, the Company shall issue the New Note to the Holder.


 


(c)       No
Actions. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or authority or legislative body to enjoin, restrain, prohibit or obtain substantial damages
in respect of, this Agreement or the consummation of the transactions contemplated by this Agreement.


 


(d)       Proceedings
and Documents. All proceedings in connection with the transactions contemplated hereby and all documents and instruments incident
to such transactions shall be satisfactory in substance and form to the Holder, and the Holder shall have received all such counterpart
originals or certified or other copies of such documents as they may reasonably request.


 


(e)       No
Event of Default. After giving effect to the Exchange, no Event of Default (as defined in the New Note) or event that with
the passage of time or giving of notice would constitute an Event of Default shall have occurred and be continuing.


 


(f)       Consents.
The Company shall have obtained all governmental, regulatory or third party consents and approvals (or waiver of such consents
or approvals), if any, necessary for the Exchange, including without limitation, those required by the Principal Market, if any,
and the Required Consents.


 


(g)       Listing.
The Common Stock (A) shall be designated for quotation or listed (as applicable) on the Principal Market and (B) shall not have
been suspended, as of the Closing Date, by the SEC or the Principal Market from trading on the Principal Market.


 


(h)       Fees.
The Company shall have paid, in full, to Kelley Drye & Warren LLP the Company Expense Amount and all outstanding invoices delivered
by Kelley Drye & Warren LLP to the Company prior to the date hereof.


 


6.2.       Condition’s
to the Company’s Obligations. The obligation of the Company to consummate the Exchange is subject to the fulfillment,
to the Company’s reasonable satisfaction, prior to or at the Closing, of each of the following conditions (unless waived
by the Company in writing, prior to the Closing):


 





(a)       Representations
and Warranties. The representations and warranties of the Holder contained in this Agreement shall be true and correct in all
material respects (except for those representations and warranties that are qualified by materiality or material adverse effect,
which are accurate in all respects) on the date hereof and on and as of the Closing Date as if made on and as of such date (except
for representations and warranties that speak as of a specific date, which are accurate in all material respects (except for those
representations and warranties that are qualified by materiality or material adverse effect, which are accurate in all respects)
as of such specified date).


 






    10


     


    

 


(b)       No
Actions. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or authority or legislative body to enjoin, restrain, prohibit, or obtain substantial damages
in respect of, this Agreement or the consummation of the transactions contemplated by this Agreement.


 


(c)       Proceedings
and Documents. All proceedings in connection with the transactions contemplated hereby and all documents and instruments incident
to such transactions shall be satisfactory in substance and form to the Company and the Company shall have received all such counterpart
originals or certified or other copies of such documents as the Company may reasonably request.


 


7.                 
No Integration. None of the Company, its Subsidiaries, any of their affiliates, or any Person acting on their
behalf shall, directly or indirectly, make any offers or sales of any security (as defined in the Securities Act) or solicit any
offers to buy any security or take any other actions, under circumstances that would require registration of the New Note under
the Securities Act or cause this offering of the New Note to be integrated with such offering or any prior offerings by the Company
for purposes of Regulation D under the Securities Act.


 


8.                 
Fees. At the closing, the Company shall pay Kelley Drye & Warren, LLP (counsel to the Holder) a non-accountable
amount of $15,000 for the costs and expenses incurred by it in connection with preparing and negotiating this Agreement and the
New Note (the “Counsel Expense Amount”).


 


9.                 
Holding Period. For the purposes of Rule 144, the Company acknowledges that the holding period of the
New Note may be tacked onto both the holding period of the Existing Note and the holding period of the Original Note, and the
Company agrees not to take a position contrary to this Section 10. The Company acknowledges and agrees that assuming (a) the Holder
is not an affiliate of the Company and (b) at such time of determination no Current Public Information Failure exists, the New
Note shall not be required to bear any restrictive legend and shall be freely transferable by the Holder pursuant to and in accordance
with Rule 144.


 


10.             
Blue Sky. The Company shall make all filings and reports relating to the Exchange required under applicable
securities or “Blue Sky” laws of the states of the United States following the date hereof, if any.


 






    11


     


    

 


11.             
Disclosure of Transaction.


 


(a)       On
or before the earlier to occur of (i) 5:00 p.m., New York time, on November 10, 2019 and (ii) the time of filing of the
Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2019 (the “10-K Filing”),
the Company shall file a Current Report on Form 8-K (including all attachments, the “8-K Filing”)
describing, or include in the 10-K Filing, as applicable, all the material terms of the transactions contemplated by the
Exchange Documents in the form required by the Exchange Act and attaching this Agreement and the forms of the New Note (such
applicable 10-K Filing and/or 8-K Filing, the “Cleansing Filing”). From and after the filing of the
Cleansing Filing, the Company shall have disclosed all material, non-public information (if any) provided to the Holder by
the Company or any of its Subsidiaries or any of their respective officers, directors, employees or agents in connection with
the transactions contemplated by the Exchange Documents. In addition, effective upon the filing of the Cleansing Filing, the
Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written
or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees
or agents, on the one hand, and the Holder or any of its affiliates, on the other hand, relating to the transactions
contemplated by the Exchange Documents, shall terminate.


 


(b)       Except
as may be required by the Securities Purchase Agreement or the New Note, the Company shall not, and the Company shall cause each
of its Subsidiaries and each of its and their respective officers, directors, employees and agents not to, provide the Holder with
any material, non-public information regarding the Company or any of its Subsidiaries from and after the date hereof without the
express prior written consent of the Holder (which may be granted or withheld in the Holder’s sole discretion). To the extent
that the Company delivers any material, non-public information to the Holder without the Holder’s consent, other than as
required by the Securities Purchase Agreement or the New Note, the Company hereby covenants and agrees that the Holder shall not
have any duty of confidentiality with respect to such material, non-public information. Subject to the foregoing, neither the Company,
its Subsidiaries nor the Holder shall issue any press releases or any other public statements with respect to the transactions
contemplated hereby; provided, however, the Company shall be entitled, without the prior approval of the Holder, to make any press
release or other public disclosure with respect to such transactions (i) in substantial conformity with the Cleansing Filing and
(ii) as is required by applicable law and regulations. Notwithstanding anything contained in this Agreement to the contrary and
without implication that the contrary would otherwise be true, the Company expressly acknowledges and agrees that the Holder shall
not have (unless expressly agreed to by the Holder after the date hereof in a written definitive and binding agreement executed
by the Company and the Holder), any duty of confidentiality with respect to any material, non-public information regarding the
Company or any of its Subsidiaries.


 


12.             
Notices to Holder. All notices to Holder pursuant to the Securities Purchase Agreement or the New Note shall
be delivered in accordance with the notice instructions set forth on the signature page of the Holder attached hereto (or such
other instructions delivered in writing to the Company by the Holder from time to time).


 


13.             
Termination. If the Transaction is not consummated on or prior to November 15, 2019, the Holder may terminate
this Agreement by written notice to the Company and this Agreement shall thereafter be null and void, ab initio.


 






    12


     


    

 


14.              Independent
Nature of Holder’s Obligations and Rights. The obligations of the Holder under this Agreement are several and
not joint with the obligations of any other holder of securities of the Company (each, an “Other
Holder”), and the Holder shall not be responsible in any way for the performance of the obligations of any Other
Holder under any other agreement by and between the Company and any Other Holder (each, an “Other
Agreement”). Nothing contained herein or in any Other Agreement, and no action taken by the Holder pursuant hereto,
shall be deemed to constitute the Holder and Other Holders as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Holder and Other Holders are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by this Agreement or any Other Agreement and the Company
acknowledges that, to the best of its knowledge, the Holder and the Other Holders are not acting in concert or as a group
with respect to such obligations or the transactions contemplated by this Agreement or any Other Agreement. The Company and
the Holder confirm that the Holder has independently participated in the negotiation of the transactions contemplated hereby
with the advice of its own counsel and advisors. The Holder shall be entitled to independently protect and enforce its
rights, including, without limitation, the rights arising out of this Agreement, and it shall not be necessary for any Other
Holder to be joined as an additional party in any proceeding for such purpose.


 


15.             
Miscellaneous Provisions. Section 9 of the Securities Purchase Agreement (as amended hereby) is hereby incorporated
by reference herein, mutatis mutandis.


 


[The remainder of the
page is intentionally left blank]


 









    13


     


    

 


IN WITNESS WHEREOF,
the Holder and the Company have executed this Agreement as of the date first set forth on the first page of this Agreement.


 


	 	COMPANY:
	 	 
	 	KUSHCO HOLDINGS, INC.
	 	 
	 	By:	/s/ Nicholas Kovacevich
	 	 	Name: Nicholas Kovacevich
	 	 	Title: Chairman and Chief Executive Officer 








 






     


     


    

 


IN WITNESS WHEREOF,
the Holder and the Company have executed this Agreement as of the date first set forth on the first page of this Agreement.


 


	 	HOLDER:
	 	 
	Principal Amount of Existing Note:	
        HB SUB FUND II LLC

        

        

	 	 
	
        $21,300,000                           
	 
	 	
        By:
	/s/     George
    Antonopoulos                                            




        

	Principal Amount of New Note:	 	Name: George
    Antonopoulos
	 	 	Title: Authorized Signatory 
	$23,962,500                           	 	 
		Address for Notices:
	 	 
	 	Please deliver any notices other than Pre-Notices to:
	 	 
	 	777 Third Avenue, 30th Floor

New York, NY 10017

Attention:  Yoav Roth

Facsimile:  (212) 571-1279

E-mail:  investments@hudsonbaycapital.com

Residence:  Cayman Islands
	 	 
	 	Please deliver any Pre-Notice to:
	 	 
	 	777 Third Ave., 30th Floor
	 	New York, NY 10017
	 	Facsimile: (646) 214-7946
	 	Attention: Scott Black
	 	General Counsel and Chief Compliance Officer
	 	 
	 	with a copy (for information purposes only) to:
	 	 
	 	Kelley Drye & Warren LLP

101 Park Avenue

New York, NY 10178

Telephone: 212-808-7540

Facsimile: (212) 808-7897

Attention:  Michael Adelstein, Esq.

Email:  madelstein@kelleydrye.com




 






     


     


    

  


SCHEDULES TO EXCHANGE AGREEMENT


 


SCHEDULE 4.1


 


Subsidiaries


 


	Entity Name	Jurisdiction of

 Organization	Authorized Interests	Outstanding Interests
	Kush Energy, LLC	Colorado	Membership interests 	100% of membership interests held by KushCo Holdings, Inc.
	Kush Supply Co. LLC	Nevada	Membership interests 	100% of membership interests held by KushCo Holdings, Inc.
	Celeritas Industries, LLC	Nevada	Membership interests 	100% of membership interests held by KushCo Holdings, Inc.
	Zack Darling Creative Associates, LLC	California	Membership interests 	100% of membership interests held by KushCo Holdings, Inc.
	The Hybrid Creative LLC	California	Membership interests 	100% of membership interests held by Zack Darling Creative Associates, LLC
	Koleto Innovations LLC	Nevada	Membership interests 	100% of membership interests held by KushCo Holdings, Inc.
	KIM International Corporation	California	10,000,000 shares of a single class of stock, no par value specified	10,000 shares of stock (all held by KushCo Holdings, Inc.)
	KCH Distribution Inc.	British Columbia	1 common share	1 share of common stock (all held by KushCo Holdings, Inc.).


 


SCHEDULE 4.4 


 


Required Consents


 


None


 


SCHEDULE 4.9


 


Transactions with Affiliates


 


The Company and its subsidiaries provide customary
compensation for the benefit of present and/or former directors, officers, and employees (including bonuses and stock option programs),
as well as customary benefits and indemnification arrangements.


 






     


     


    

 


SCHEDULE 4.10


 


Equity Capitalization


 


Preemptive Rights


 


		·	Pursuant to the “Purchase Rights” set forth in Section
                                                                                                          4(a) of the Existing Warrant, Holder is entitled to receive, on an as-converted basis, options, convertible securities, and
                                                                                                          rights to purchase stock, warrants, securities
or other property that are otherwise issued to the record holders of any class of Common Stock of the Company on a pro rata
basis
		·	Pursuant to the “Purchase Rights” set forth in Section 4(a)
of those certain Warrants to Purchase Common Stock dated as of the date hereof and issued by the Company to certain affiliates
and related funds of Monroe Capital Management Advisors, LLC (the “Specified Warrants”), the holder thereof
is entitled to receive, on an as-converted basis, options, convertible securities, and rights to purchase stock, warrants, securities
or other property that are otherwise issued to the record holders of any class of Common Stock of the Company on a pro rata
basis



		·	Pursuant to the Securities Purchase Agreement, Holder is entitled to participation
rights for any “Subsequent Placement” (as defined therein) under specified circumstances



		·	Pursuant to the New Note, the Holder has the right to receive warrants under
specified circumstances under the definition of “Permitted Senior Indebtedness” (as defined therein)



 


Convertible or Exchangeable Securities


 


		·	Outstanding options to purchase 12,662,000 shares of common stock of KushCo
Holdings, Inc.



		·	Outstanding warrants (excluding the Existing Warrant and the Specified Warrants
(defined above) copies of which have been provided to Holder) to purchase 6,988,000 shares of common stock of KushCo Holdings,
Inc.



 


SCHEDULE 4.11


 


Other Indebtedness


 


		·	Indebtedness incurred pursuant to the “Senior Secured Financing Agreement”
(as defined in the New Note)



		·	The New Note